STRATFOR - A new alternative fuel technology, backed by oil supermajor BP, could begin to make a dent in the world's dependence on traditionally sourced natural gas. Most importantly, it could affect the geopolitical dominance of countries like Russia, which have large deposits of natural gas and therefore a major foothold in the current global energy market. The technology is not a sure bet; more work needs to be done to make it commercially viable. Still, it is instructive to look at the geopolitical effects such a technology could have.
Calling XOM, doing anything besides looking for more oil boyz? Sunoco? Chevron? Amoco?
The new alternative fuel technology would produce methane (also known as natural gas) from carbon dioxide (CO2) using microscopic organisms, or microbes, that eat CO2 and produce methane as waste. The technology is based on advancements in both genomics and microbiology and is being propelled by U.S. geneticist Craig Venter, most noted for his work on sequencing the human genome. Venter claims that in 18 months his research company, Synthetic Genomics, will be able to produce this nontraditional source of natural gas, but only time will tell how cost-effective this new technology will be in comparison to traditionally sourced natural gas.
The implications of this technological advancement are vast. For one thing, it would provide a new alternative to drilling for natural gas deposits in the ground. Natural gas pockets are finite in number and costly to find -- not to mention the cost of extracting and transporting the natural gas to consumers. With the new technology, microbes would be able to produce methane from CO2 in specific quantities wherever it was needed.
From an environmental and policy standpoint, this means that a cleaner-burning fuel could be made by harnessing a greenhouse gas. Furthermore, the explosive hazards associated with pipelines or the shipping of natural gas in liquefied form -- which are large inhibitors of natural gas expansion in places like the United States -- could largely be abated.
From a geopolitical standpoint, the technology could begin to change the global geopolitical energy balance. Russia is the world's largest natural gas exporter. As recent events in Ukraine and Europe have shown, Russia takes this power seriously and often uses it as a political lever to ensure Moscow gets what it wants. Europe is already beginning to diversify its natural gas imports -- including building new pipelines to places such as Libya and building new import terminals so Europe can accept more liquefied natural gas. Imagine if European countries began to produce their own natural gas and slowly end their tumultuous reliance on Russian energy sources. The new technology could also begin to affect other natural gas exporting states such as Qatar, Algeria, and Indonesia, thus beginning to change the balance of power in those regions.
This energy advancement is not the rogue project of a single mad scientist. BP backs Venter's firm, and Venter is not the only geneticist using genetic manipulation with the aim of creating organisms that will produce fuel. Nonetheless, there are many steps between here and there, leaving plenty of room for other researchers and corporate backers to compete.
Oh MIT, Harvard....too busy? Cal Tech, Stanford? Hello?
These steps include:
- Capturing CO2 in a large enough quantity to produce usable amounts of methane;
- Producing the microbes;
- Scaling the technology; and
- Identifying the infrastructure needed to distribute the methane.
The latter step is the most interesting to analyze. Any new technology faces a barrier to entry and a series of trade-offs regarding the benefits of adopting the technology versus the adaptations required for its use. Therefore, applications of new technologies that do not require much change to existing infrastructure are often the fastest to get to market.
In the Western world, the quickest application of the microbial fuel technology could be at the power plant. Microbial fuel could be used as a supplement to traditionally sourced natural gas used at natural gas power plants, or it could run alongside a coal-fired power plant if carbon capture technology gets off the ground, producing methane as a byproduct. Under this scenario, microbial fuel could feed back into a natural gas power plant or transit down the same natural gas distribution lines already in place to reach businesses and homes.
In developing countries, where existing energy infrastructure is minimal, microbial fuel technology could begin to feed a new decentralized electric power system -- one that relies on distributed power generators (small generators providing electricity for only a small number of consumers).
Outside of power generation, microbial fuel could be used in vehicles, but this scenario first has a large infrastructure hurdle to surmount. Typically, natural gas vehicles are primarily used as fleet vehicles -- buses, heavy-duty trucks and government vehicles -- because fleet owners can install their own natural gas fueling stations. However, some automobile manufacturers are beginning to offer natural gas-fueled personal cars that often have the ability to switch from gasoline to natural gas depending on fuel availability. This likely would be the first use of microbial natural gas directly in vehicles, as it would require less change to vehicle fueling infrastructure in the short to medium term. Another avenue for vehicle fuels is gas-to-liquid technology: Through a chemical reaction, microbial gas could be turned into a liquid, which could then be refined into a product similar to gasoline. This avenue would not require much change in fueling infrastructure or in automobile design. If microbial fuel goes down the personal car fuel track, it could not only change the natural gas landscape but also begin to make a dent in global oil demand, because transportation is a large percentage of that demand.
This new technology still has a long way to go until it can actually begin to affect demand at natural gas behemoths such as Russia's Gazprom; in fact, it might not even be possible. However, the idea that a country can begin making its own natural gas without being naturally endowed with geologic natural gas deposits begins to shift geopolitics in a way that does not happen very often. For instance, Japan is a top natural gas importer, and as such is always concerned about future energy security and global price fluctuations. And Turkmenistan's economy, for example, is heavily dependent on its natural gas export revenue. In this respect, technological advancements -- especially those linked to energy -- become an important factor in monitoring the world's geopolitical balance.
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