IEA offers path to gas "Golden Age"

As the U.S. continues to see natural gas emerge as the fuel of choice from power plants to factories to home heating, a new report suggests that the energy source could see similar success on a global scale, given the right conditions.

On Tuesday, the International Energy Agency released a report entitled "Golden Rules for a Golden Age of Gas" that suggests the global energy picture could shift dramatically in favor of the fossil fuel over the next two decades.

Bright future for natural gas

Thanks to engineering research and development in the oil and gas industry over the past few decades, the U.S. natural gas industry has been able to tap into massive reserves of so-called unconventional gas. By tapping into reserves of gas trapped within porous shale rock through the process known as hydraulic fracturing, the country has seen a massive surge in domestic production, propelling it past Russia to become the globe's top producer of natural gas.

If the energy industry can begin to tap into these reserves in other countries around the world and continue to develop resources in the current big shale gas producers like the U.S. and Canada, the IEA estimates that global production could rise as much as 50 percent from 2010 to 2035. According to Bloomberg, the report suggests shale alone could rise from 14 percent of production in 2012 to as much as 32 percent of production in that period.

In this best-case scenario, natural gas would grow to account for around one-quarter of all energy consumption in the world, from less than 21 percent in 2010. In the process, the fossil fuel would pass coal to become the second-largest source of energy in the world, trailing only oil.

Nothing guaranteed

But despite these rosy projections, the IEA's report insists some serious roadblocks stand in the way of the natural gas industry's development. In particular, the potential backlash from environmental concerns surrounding fracking could effectively halt growth in production. In the slower growth model, Platts reports gas reaches only around 22 percent of all energy consumption, still less than coal even after two decades.

"The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way," IEA executive director Maria van der Hoeven said in a statement. "But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place."

Already, Bloomberg notes that France and Bulgaria have instituted bans on fracking, and the U.K. halted the practice after local energy companies drew a connection between fracking and unusual seismic activity.

If energy companies hope to see continued growth, they will need to institute a strict set of environmental and transparency rules to maintain the public's faith in the industry. These rules are expected to raise costs around 7 percent, but mean the difference between growth and stagnation.

"The concerns of local communities are legitimate ones," Fatih Birol, chief economist at the IEA, told Bloomberg. "There are some companies that are following the rules we are suggesting here. The destiny of the shale-gas industry will be decided not by the best practices but by the worst practices."

Environmental concerns are not the only challenge either. Recent difficulties in developing China's nearly 1.3 quadrillion cubic feet of shale gas and Poland's nearly 190 trillion cubic feet have shown that engineering research is still necessary to bring down costs in some regions. Developments in Poland have cost nearly three-times similar projects in the U.S.