Environmental Benefits of SNG
SNG International Inc. will be part of the global energy production industry. Utilizing data from the U.S. energy production industry can give some indication of the state of this thriving field today. Over the past five years, energy production has witnessed a sustained increase due to the strong production of crude oil and natural gas within the United States. The shale oil boom has also resulted in a dramatic growth in crude oil production. Natural gas is becoming a more popular energy source, and exports have been growing throughout the period. Coal and nuclear power, by contrast, have both experienced declines during the same time period, largely due to growing environmental concerns and stricter government regulation. It can be expected that natural gas and renewable forms of energy will continue to experience steady growth and likely be instrumental in the further decline of coal and nuclear energy sources. Overall, energy production is anticipated to continue increasing at an annualized rate of 1.0 percent over the five years to 2027 as the U.S. grows in importance in the global energy market.
The coal and natural gas power industry specifically was responsible for generating 60.1 percent of the total 4.1 trillion kilowatt-hours of electricity produced at utility-scale generation facilities in the United States in 2021. Because the energy industry has been shifting away from fossil fuels and towards more sustainable resources, this sector of the industry has seen a waning share of generation capacity than it had previously. This push for sustainability has resulted in a decrease in demand for coal but has benefited the natural gas sector because it is a relatively clean energy source, especially when compared with coal. Over the past five years, revenue has increased at an annualized rate of 1.1 percent, and the coal and natural gas power industry in the United States currently experiences $93.4 billion in revenue.
Coal-based power traditionally accounted for the largest source of electric power in the United States, but the industry has been increasingly moving away from coal toward the more environmentally friendly natural gas resources. One primary factor encouraging this shift has been the dramatic increase in available shale gas, which has become newly available thanks to the growing usage of enhanced oil recovery techniques used by producers. Natural gas plants can also be more cost-efficiently created and expanded, with initial capital cost requirements typically lower than for coal plants.
Several vital key factors exist by which the coal and natural gas industry in the U.S. can be measured. Currently, these include electric power consumption, the industrial production index, the value of utility construction, and the world price of both steaming coal and natural gas. Electric power consumption calculates the entire total amount of electricity consumed in the U.S., over half of which comes from coal and natural gas power. Increases in electric power consumption result in the growing demand for electricity and subsequent growth in industry revenue. In 2022 and beyond, this factor is expected to increase, providing a growth opportunity for the industry.
The industrial production index should also be examined as it relates to this industry. This index measures the total production of the manufacturing, mining, and utility sectors. These operators are typically very energy-intensive, so increasing levels of industrial products lead to the growing demand for electric power. Thus, growth in the industrial production index, which is anticipated to continue increasing, translates into a revenue boost for industry operators. Next, the value of utility construction also shows a growth opportunity. This factor measures the amount of capital spent on the construction of power plants annually. Growth in the value of utility construction indicates related growth in the quantity of electricity generated nationally, potentially increasing industry revenue.
Global pricing of both natural gas and steaming coal are also significant factors for this industry’s success. Natural gas, which is a major input for industry operations, is becoming a more important fuel source in electricity generation due to having a lighter effect on the environment, in addition to increasing availability, improvements in natural gas turbine technology, and a long-term decline in natural gas prices. Steaming coal is still the most heavily used fuel in industry operations despite the shift towards more sustainable processes, and its price is expected to increase in 2022, likely resulting in further downward pressure on this sector of the industry.
Turning to the international market, recent estimates state that coal is used to generate approximately 41.0 percent of the world’s electricity. It is the most abundant and least expensive of all the fossil fuels, resulting in it being the most popular. However, the increased awareness of significant negative environmental impacts stemming from coal mining and use has led to many seeking alternative energy sources that are better for the environment. Coal mining can lead to the loss of habitat for animals, soil erosion, and pollution. It can also cause heavy metals to seep into ground and surface water, creating health problems for people and animals. In addition, using coal as an energy source is associated with negative environmental factors such as particulate emissions, ground-level ozone, smog, and acid rain. The gaseous byproducts of coal also contribute to global climate change.
According to Our World in Data organization, energy production (specifically the burning of fossil fuels) accounts for approximately 75.0 percent of global greenhouse gas emissions. In addition to climate change, this source also highlights the human cost of using fossil fuels such as coal: at least 5.0 million deaths are attributed to air pollution per year, which is a direct result of burning fossil fuels and biomass. The ultimate goal for the protection of the environment would be for a global transition to renewable and nuclear energy sources, which would dramatically reduce greenhouse gas emissions and “decarbonize” the industry. However, as seen in the graph below, renewable and low-carbon sources only account for 11.4 and 15.7 percent of global energy, respectively. By far, the majority of energy sources are currently fossil fuels, consisting of oil, coal, and gas. However, of these sources, natural gas is the superior choice because it is considered to be the cleanest of the options.
Focusing specifically on global natural gas production, recent statistics display a sustained increase in production across the world, with the United States, Russia, and Saudi Arabia being the largest three providers of the resource. In 2018, U.S. natural gas production increased by 12.0 percent to 28.5 billion cubic feet per day, or 31.5 quadrillion BTU, reaching a new record high for the second year in a row. In addition, ongoing growth in liquefied natural gas export capacity and the expanded ability to reach new markets have resulted in an increase in U.S. natural gas production.v
Because SNG International Inc. is not focusing on the production of natural gas but rather emphasizes the usage of liquefied natural gas as a primary ingredient in its ultimate product, solid natural gas, its output will shake up the energy industry as a whole due to providing a novel and innovative way for companies and governments to fuel operations with both a more cost-effective, cleaner, and even more energy efficient source, which can ideally continue eliminating coal. Coal is responsible for at least 40.0 percent of global CO2 emissions, making coal the #1 accelerator of global warming.vi
Energy is a global industry. From developing countries to first-world nations, every government and nation requires some form of energy to power its operations, plants, factories, and public and private buildings. The forms of energy sources vary widely across the globe, with coal and other fossil fuels still comprising the bulk of sources, but with many countries attempting to transition into more eco-friendly forms of renewable energy such as solar and wind power. However, the massive amounts of funding and infrastructure change needed to transform the global energy landscape into fully renewable energy is not a realistic solution in the short term, even if it is an ideal long-term goal.
Therefore, countries will be seeking a middle ground whereby they can begin reducing their climate change emissions while still maintaining much of the infrastructure that they built originally for energy sources such as fuel. This is where solid natural gas enters the picture, offering a new alternative to coal that will appeal to governments and private operations worldwide as an obvious answer. Any client that currently utilizes any form of energy resource, especially fossil fuels and other nonrenewable sources of energy, is a potential client for SNG.
The above graph depicts the major market segmentation within the U.S. for coal and natural gas power. These will be the same operators as the market for solid natural gas, as it offers a clearly superior alternative to both coal and natural gas power alike. The primary markets for the industry are divided among consumers and businesses. The generated electricity is distributed to end-users or can also be purchased through wholesale markets directly. Industry operators, thus, do not technically generate revenue from end users, but demand for electricity from commercial, industrial, and household consumers is still the primary driver of industry revenue. In general, consumers witness the most expensive retail electricity prices, while industrial users tend to garner lower rates due to being more likely to make purchases in bulk.
With this in mind, it tracks that consumers’ share of energy revenue is higher than its share of total electricity consumption, whereas the opposite holds true for industrial users. ii
Natural gas is considered the least ecologically harmful of fossil fuels and is a good middle ground for transitioning to more green energy sources. To eliminate coal in the future, demand for the natural gas industry is a good way to predict demand for solid natural gas produced by SNG. According to the “Gas Market Report 2021,” developed by the International Energy Agency, natural gas demand is increasing globally due to countries and customers seeking more effective and less harmful sources of energy to power their operations. After the pandemic, gas demand rebounded 3.6 percent in 2021 and is predicted to keep growing in the coming years to reach about 4,300 billion cubic meters by 2024, a 7.0 percent rise from pre-COVID levels of demand. vii
Short-term recovery is anticipated to play a major role in the forecast period of growth, with the demand gains predicted in 2021 about 40.0 percent of the total increase. The global gas consumption growth rate was 3.6 percent in 2021 and is now maintaining steadily at approximately 1.7 percent, expected until 2024. The industrial sector remains the largest market sector and provides the greatest contribution to the 2021 recovery in global gas demand. The growing demand for natural gas globally, both used in industrial processes and as a feedstock, is anticipated to account for a dominant 40.0 percent share of the total increase in gas consumption over the 2020 to 2024 period. vii
The Asia-Pacific region alone is responsible for about half of total gas demand growth, showing a 47.0 percent share of the global increase. The second-largest contributor to growth is the Middle East, which has a 20.0 percent share.Most other regions—especially those located in mature markets—depict the bulk of the increase coming in the initial post-pandemic years, as demand continues to recover from the 2020 downturn. This return to economic growth, spearheaded by Asia’s fast-growing markets and driven by the industrial sector, remains the principal driver of rising gas consumption and accounts for almost two-thirds of the gross demand increase by 2024. Fuel substitution in favor of gas and at the expense of coal and oil, mainly located in the power generation sector, covers the remaining third of the gross demand increase. vii