[Markos101]

Shares magazine article (UK) provides some insights into alternatives and also UK government policy on oil replacements.

$this->bbcode_second_pass_quote('', 'B')ritain became a net importer of oil last month - the first time for 13 years. There could be a deficit for the whole of 2005, and almost certainly one for 2006. North Sea oil is running out earlier than expected. To make matters worse, the price of imported oil has almost doubled this year. Investors seeking the 'next big thing' can profit from this uncertainty by investing in a selection of shares in non-oil energy alternatives such as solar, wind and wave power.

Ooil stocks have had a great run on the back of soaring crude. They should rise further if the companies strike lucky in their exploration programmes and/or the oil price averages around $40 a barrel in 2005, instead of the below $30 many analysts expect. But investors should not be putting all their energy eggs into one basket.

Increased emphasis by Tony Blair on green energy casts a shadow over coal-fired power stations, which account for just over a third of UK electricity production. However, an expensive programme of fitting 'scrubbers' to station chimneys to clean emissions is underway. These remove sulphur and particulates but not the carbon dioxide and greenhouse gases. However, it is extremely difficult to see how Britain can replace coal power in the foreseeable future unless it becomes totally reliant on natural gas. This poses questions over the security of supply, as most of the gas will be imported. This is why the government is back-pedalling on undertakings to close non-carbon-polluting nuclear power plants when the current stations reach the end of their operational life in 20 years.

It looks increasingly likely that the government will agree to extend the life of the eight existing AGR power stations to 2040. Nuclear power accounts for just over 20% of electricity generation and cannot easily be replaced. Indeed, new nuclear stations could well be constructed, but probably not for another 30 years.

Professor Ian Fells, head of energy consultancy Fells Associates, is adamant that the UK must go nuclear. 'It is absolutely essential for the UK to build new nuclear power stations', he said last week.

Change At The Coal Face

All this is good news for British Energy, especially if the £5 billion reconstruction plan is changed to allow ordinary shareholders to retain a bigger stake in the company.

It costs around £800 a kilowatt to build a nuclear powerstation - twice the cost of constructing a gas-fired station that takes half the time to build. This gap has narrowed substantially and means nuclear power over the 30-year lifespan of a third generation plant is not much more costly than gas rivals.

The government is also believed to be ignoring environmental objections to coal for the same reason. This is excellent news for the coal industry and in particular UK Coal. New coal-powered fire stations are unlikely to be built, but replacement stations and expansion of existing plants cannot be ruled out.

For instance, wind power is unreliable as there is insufficient wind for about a fifth of the time. So the 10% wind target - meaning 20,000 windmills by 2015 - is a chimera, with maybe 10,000 machines supplying 5% of UK power a more achievable aim. Companies supplying wind-energy components say orders have been slow to arrive and that the whole programme is almost a year behind schedule.

Wave power has potential, though, and solar power is becoming more efficient. Biomass projects from rubbish dumps are few and far between, but Compact Power (CPO) - see page 18 - is confident. Fuel cells can be seen powering some buses and vans but look unlikely to become widespread due to their expense (see ITM Power) and problems storing hydrogen to power them.

Brink of a boom

This leaves natural gas firmly in the driving seat. It is the major beneficiary of higher oil prices and limited oil reserves. And it is non-polluting in terms of nitrous oxide, although it does create plenty of carbon dixoide and so it is not really half as clean as its advocates claim.

'We are on the brink of a whole new LNG boom' said the head of Shell's exploration arm, who also predicts that gas production will soon overtake oil production.

Two-fifths of Britain's electricity comes from gas-fired power stations, compared with almost nothing 15 years ago. It is expected that nearly three-quarters of electricity will come from gas by 2025.

The problem is that supplies of UK gas are running out, which means importing much more from Norway and Russia. Probably half of our gas supply will have to be imported by 2010, souring up 70% by 2020. A tight gas market over the next couple of years is good for producers and these exporting countries, but not for customers of British Gas, whose tarriffs are soaring. There is also a severe shortage of gas storage capacity, with reserves dropping dangerously low last winter to just eight days at one point. In the longest term, though, the pricing pressure might ease after major gas storage facilities are built at Milford Haven and the Isle of Grain. These liquid natural gas tanks will store imported LNG from countries in North Africa and further afield.

In the last decade, energy companies have drilled four times as many oil exploration wells as gas wells, but they have discovered about four times as much gas as oil. This is enough gas to last the world for 60 years at current rates of consumption [! - Ed] - that's 50% longer than the world's oil fields.

The problem is that gas is traditionally much more difficult to capture and transport than oil. This means most of it is wasted or left underground. Higher gas prices are starting to make many of these reserves economic, however - especially as technology for turning gas into a much denser liquid state has progressed, cutting costs, and transportation is also improved. New gas pipelines are being built and liquid natural gas tanker construction is rising sharply from around a dozen a year to 33 this year, 45 next and 59 in 2006.

In the US, a $15 billion pipeline is to bring gas from Alaska and Canada to ease energy shortages. One beneficiary could be oil and gas services company Hunting and its Gibson Energy offshoot, which is expected to win one of the pipeline contracts...

[Colorado-Valley]

So I guess the idea is to wreck the world's atmosphere by burning massive amounts of natural gas until it runs out, too.

I've gotten a lot of guff in my life for not wanting to have kids for environmental reasons. But the only way I can see humanity's survival is to reduce this exploding population to a level where it won't wreck all the world's natural systems.

Natural gas is just another fossil-fuel greenhouse gas.

[goldfishbowl42]

Although Natural Gas is more plentiful in reserve terms now, it will still peak, and when it does it drops off much quicker.

All Gas will do is Buy us some time maybe 15 to 20 years after oil peak, before we really have to be on a renewables economy.

The only really long term non-renewable energy sources are Nuclear and Coal.

Plus all the energy markets are interlinked. If one gets expensive it puts more pressure on the others and they all get expensive. Look at Gas prices this year for your evidence. And Gas isn't going to get cheaper anytime soon while oil is still getting more expensive.