Town gas – then and now
The Empire Exhibition was held in Wembley, 1924, North London. In a poster advertising that exhibition, the muck and soot of coal was transformed into a clean and glowing figure of a healthy man – representing natural gas. As recent as 60-odd years ago, British society ran on ‘town gas’ – gas manufactured locally in towns from coal (occasionally oil) shipped in through canals. An example of this is the map below (credit and larger image here), where the gas works intersects with the river and is very close to the town itself. The British market for gas was nationalised in 1949 along with the rest of the fuel industries.
In the 1930s a subsidiary of Shell acquired exclusive exploration rights for oil and gas in the North-East of the Netherlands. This subsidiary then established the ‘Nederlandse Aardolie Maatschappij’ (NAM) with the Standard Oil Company of New Jersey (later to become Exxon). Though the NAM primarily aimed at oil exploration and production, gas was found first in 1948 along with a number of both oil and gas small to moderate fields in the 1950s.
At this point gas was still largely considered a public utility – operated on cost-plus and low profit. Then-Shell managing director, Salvador Bloemgarten, boldly said: “stay out of gas, there is no money to be made”. However, in the UK, consumption was growing and it was clear that manufactured gas could not keep up with the demand. With no indigenous gas known, Shell found a solution in supercooling gas and shipping it via tanker and in 1959 the very first Liquefied Natural Gas (LNG) tanker came from the Gulf of Mexico. By 1964, Algerian LNG was regularly shipped in bulk.
Both the British and Dutch gas markets were essentially galvanised by the discovery of the incredibly large Groningen gas field in the Netherlands. In 1959 NAM discovered a large gas field in the Netherlands. By the time NAM started negotiations for extraction in 1960, the field size was estimated to be 60bcm – an extremely large volume for that time. The exact size of the monolithic gas field, named Groningen, would be finally confirmed some thirty years later at 2,600bcm. Triggered by the success of the NAM, the UK began exploring the North Sea located between the two countries in 1962, with a national grid being built after finding oil and gas in 1967. The extent of these discoveries enabled the UK mainland to switch entirely from manufactured gas to natural gas.
With the discovery of vast and easily extractable natural gas deposits through the mid-20th century, town gas became obsolete, dirty, and expensive to produce. Gas production became centralised, and both the technological and geographical knowledge that accompanied this gas revolution allowed storage and distribution to centralise also. Now, it is natural gas that is the dominant supply in the British gas network.
Thoughts on a transition
Looking at the agenda of this year’s Flame conference, it’s clear that the energy transition is a concern for gas. For context, this is the largest annual industry gathering in Europe – and one that is dedicated mainly to gas. This ranges from the defensive panel discussion ‘Fighting Gas’ Corner’ on day one (following the keynote address) and ‘How Can Gas Remain Relevant?’ on day two, to broader questions about demand and electricity market redesign. This is far from the only industry group that is considering the future of gas in a low-carbon policy environment.
How gas could lose relevance
Previous transitions in the use of gas as an energy source were based around the benefits of it – of cost, availability, and the usefulness of its applications. The Chinese used natural gas for industrial processes nearly a thousand years ago. Yet this practice was not kept up, as it failed to hold benefits. The extraction of shale gas through ‘fracking’ was known by the Soviets well before the shale revolution dominated global oil and gas pricing dynamics. To spell out the obvious, if gas fails to deliver the benefits, society will choose something else. Gas needs to make a case for itself as a cheap and sustainable fuel.
What shape could future gas take?
Hydrogen is a potential shape that gas could take in the future. It’s equally likely that biogas becomes a dominant source, but I find the parallels between town gas and hydrogen interesting. First, that they are both essentially ‘manufactured’, can be highly localised (the equipment that produces hydrogen needn’t be too large for a city), and need a different type of pipe from natural gas. I find it interesting that gas could be produced in the future, in a similar fashion to the methods we used 100 years ago.
Hydrogen is more of a carrier of energy than a fuel itself – it has to be produced by a separate fuel source. The future I see for hydrogen is that of electrolysis – using electricity to split water into hydrogen and oxygen. This is decomposed using an electrolyser, which can be tied to any form of power generation. Importantly, it can be tied to intermittent renewable power generation such as wind power, when the spot price is low or even negative depending on subsidy/ramp-up time.
It’s a fair assumption, though, that hydrogen produced today with electricity would cost around 3 times as much as hub-priced gas (see here for example). Infrastructure, whilst largely there, would still need to be refitted. Town gas may have had a high hydrogen content, but much of the pipes have been replaced for the calorific content and makeup of natural gas or LNG mixed with nitrogen. Additionally, there is a high capital cost for an electrolyser which can act as a disincentive for initial investment.
However, environmental degradation is a cost too, and cleaner energy is a benefit. If the market alone can’t support this choice, then a future switch to hydrogen will be reliant on government. Gas in whatever form is still extremely useful as a dispatchable fuel source that can balance the higher levels of intermittency from renewable generation. The costs associated with ‘peaking’ are a core advantage for the use of gas in power.