An Overview of the Natural Gas Situation Now

Conventional natural gas (NG) production in the United States is in significant decline, leading to supply and deliverability issues, higher prices and increasing dependence on foreign sources. These problems will become far more serious as domestic supplies continue to decline and NG demand increases. LNG presents the same economic cost and national security problems as imported oil. Using coal to produce NG and as replacement for NG in chemical processes would ease supply pressures by providing an alternative to at least 15% of America’s annual NG consumption, or the equivalent of 4 trillion cubic feet (Tcf) per year. This additional supply would moderate NG prices and use an additional 340 million tons of coal per year. The NG made available could be used for residential, commercial, industrial and any other application that uses NG. The amount is roughly equal to EIA’s projection of LNG imports in 2025.

World Consumption and Competition

Natural gas is projected to be the world’s most rapidly growing primary energy source over the next several decades. The EIA has estimated that NG consumption will increase over 75% from 2000 to 2025. These data show the steady rise in NG consumption:

In short, the global demand for NG is a steady drumbeat growing louder with each passing year. Further, this demand will not be evenly distributed. The emerging and transitional economies of the world will steadily increase their demand for NG in direct competition with the United States (see Figure 3.1).

For the United States, this international competition for NG will mean a new era in energy geopolitics. Not long ago, the United States and the former Soviet Union (FSU) more or less stood alone on the NG stage, but the world is changing:

Thus, the estimated global reserve of six thousand Tcf not withstanding, it is clear that the demand for NG will stimulate international competition for a diminishing resource. In fact, this competition is already under way as offshore drilling rigs leave the Gulf of Mexico in response to higher dayrates in foreign markets—the Far East, Saudi Arabia and West Africa—prompting the CEO of Rowan Drilling to comment on the Gulf situation: “rigs are going to get pulled out of here…I mean, people are bidding all over the world.” As of November 2005, at least eight jackups were scheduled to leave the Gulf in 2006—out of a fleet of only 103. Clearly, a new day is dawning for the international competition for NG.

Strong U.S. Demand for NG

For decades, NG has been an important source of energy in the United States, consistently meeting over one-fifth of demand, from 23% in 1985 to 24% in 2000 to a projected 21% in 2025. But although overall NG use is expected to remain steady on a relative basis, the manner of that use is changing dramatically. Figure 3.3 shows how consumption of NG is changing by sector, especially in regard to electric power generation.

In fact, the role of NG in producing electricity is going through a major transition. In 1990, NG provided 13% of generation in the United States, but by 2015 NG is expected to provide 22%.

Buildout of Demand Infrastructure

During the current decade, a confluence of overly optimistic supply and price projections, modified environmental regulations, changing regulatory conditions and simple convenience has led to an unprecedented buildout of NG-based power plants. For example, it is estimated that from 2000 to 2009, over 300 GW of new electric generation capacity will be constructed in the United States, of which more than 88% will be NG-based. While over 70 GW of coal-fired units are planned, most will not come on line for over a decade, forcing NG units to meet a large share of incremental electricity demand for the next 10 to 15 years.

Moreover, the demand for electricity is projected to increase steadily for the foreseeable future. The EIA has projected that electricity use will grow from 3,729 billion kWh in 2004 to 5,208 billion kWh in 2025— an increase of 40%.

Clearly, despite the questions about price and supply of NG, we continue to increase our dependency on our most volatile and costly source of supply. In fact, some states are rapidly developing an overwhelming dependence on NG-fired generation during periods of greatest demand.

Figure 3.5 details states that are increasingly dependent on NG for generation at peak periods. Each of these states—representing a population of over 108 million—had to rely on NG for at least 40% of electricity during the July 2005 heat wave, despite record prices.

In general, these states and a number of others have few options but to turn to NG during periods of peak load. Coal and nuclear are generally at full capacity as baseload facilities, hydro is geographically limited and oil capacity has been greatly reduced over the past several decades.

The Vulnerabilities of NG Policy and Supply

Given the importance of electricity in American society, the ever-growing dependence on NG for generation raises special concern that supply be adequate and prices remain stable. By 2005, it had become apparent that there were significant flaws in the U.S. NG supply system:

• By August 2005, the wellhead price of NG had reached $7.65, which was a 43% increase over August 2004.
• Year-over-year production through August had decreased by 1.5%, despite a near-record number of drilling rigs in the field.
• September/October required a Henry Hub price of over $12.00 to assure adequate storage for the upcoming winter.

While there may be a tendency to blame our NG problems solely on the hurricanes of 2004 and 2005, it is clear that there were problems in price and production long before Hurricanes Ivan, Rita and Katrina hit shore. Over the past decade the United States has greatly suffered from our general inability to more accurately predict production and, to an even greater extent, price. Much of the problem emerges from the ever-optimistic view on NG production that has prevailed in governmental and industry circles for over a decade.

Reversing course from the 1970s and 1980s, by the late 1990s energy analysts were convinced that the United States had enough NG to fuel the economy for decades to come. The National Petroleum Council’s report on natural gas summed up the consensus view:

“…the resource base exists to support the indicated levels of future demand [26.5 Tcf in 2005] and…the additional supply required can be brought to market at competitive prices…”  (NPC, 1999)

In the Annual Energy Outlook (AEO) for 1996, the EIA projected a steady increase in the growth of domestic NG production. In reality, however, the EIA projected production has been below actual production in every single year, and the discrepancy has increased over time. In fact, for the first six years of this decade, during which over 200,000 MW of NG power plants were being constructed, the 1996 EIA report overestimated production by a total of 7.29 Tcf, or 7,290 bcf.

Furthermore, the EIA was not an outlier in these optimistic projections. Other industry experts made even loftier predictions of NG production. Optimistic statements were regularly made by the American Gas Association, National Petroleum Council, Gas Research Institute and Oil and Gas Journal. This optimism relating to NG production prevailed at EIA through 2002 when the AEO projected:

“Growing numbers of new wells (will) increase natural gas production…Conventional onshore natural gas production is projected to grow rapidly in the last 20 years of the forecast.”

By 2004, however, geological reality had set in. Since then, optimistic production estimates have given way to acceptance of the grim facts of depletion:

“With increasing rates of production decline… A significant increase in conventional natural gas production is no longer expected.” (EIA, AEO, 2004)

In fact, it is now generally accepted that first-year decline rates in conventional NG wells in North America has approached 30%, necessitating the drilling of thousands of wells each year merely to maintain existing production. The problem of depletion is exemplified in three key areas of traditional NG supply for the United States: the Gulf of Mexico, Texas and Canada.

Declining Production in the Gulf of Mexico

In 2000, the Gulf of Mexico (GOM) accounted for 24% of NG production in the United States. Depletion and the exodus of major oil companies, however, have taken a toll:

As the data in Figure 3.6 indicate, production in the GOM declined steadily over 2001 to 2004 by 1,049 bcf, or 21%. By 2004 the GOM accounted for only 20% of U.S. production. Further, data from January 2005 indicate this decline is continuing as a further 17 bcf (5%) that Ivan-adjusted drop occurred relative to January 2004.

Given the recent drilling patterns in the GOM, it is likely this decline will continue. In 2001 there were 153 rigs drilling in the GOM, and by 2003 that number had decreased to 108. By November 2005, it had slipped to 73.

Stagnation in Texas

Texas has been a mainstay of NG production in the United States and in 2004 accounted for 27% of output, but there are significant indications that depletion is beginning to take a toll on Texas production. NG fields in Texas are susceptible to significant decline rates. EOG, Inc., has pegged the overall first-year decline rate for new wells at 30%. Actual production data from Texas starkly indicate the treadmill facing the NG industry:

In other words, it took three times as many wells in 2004 to produce 62% of the NG produced in Texas in 1970. These data give real meaning to the oft-repeated maxims “treadmill” and “the lowest fruit has already been picked.”

The downtrend continues; preliminary data from the Texas Railroad Commission indicate that 71,440 wells as of February 2005 could not stem a production decline of over 12% when compared to February 2004 rates.

Canada Has Its Own NG Problems

Canada is unlikely to alleviate NG supply problems in the United States, since Canada faces the same supply issues that plague the United States—namely, depletion. In terms of depletion, First Energy (2004) has estimated annual decline rates for western Canadian NG fields:

Actual production data provide strong evidence of these decline dates. In 2002, there were 9,061 NG wells drilled in Canada and production was 17.4 bcf/d. In 2004, there were 16,000 wells drilled and production was also 17.4 bcf/d. In other words, an increase of 6,939 (77%) wells from 2002 to 2004 was only able to keep production flat. In examining the NG situation, Canada’s National Energy Board (2005) concluded:

• Despite robust drilling, Canadian NG production is expected to remain flat.
• While NG production has flattened, demand has increased, largely due to oil sands operation where demand could soon reach over one bcf per day.
• Demand from NG-fired generation in Canada is also increasing and may accelerate even further due to closure of coal-fired generation in Ontario.

This situation is especially important since Canada has been the overwhelming source of NG imports to the United States. In 1993, for instance, Canada accounted for 86% of U.S. NG imports, and by 2003 that figure was 87%. The Canadian safety net has been crucial as our own NG production declined and demand ramped up. Unfortunately, based on EIA forecasts, the days of increasing NG imports from Canada appear to be over:

In essence, the rise in Canadian imports in the 1990s appears to have peaked, and reduced imports are projected, with a decline of 2.3 Tcf (65%) from 2000 to 2025 and beyond.

Economic Impacts of Rising NG Prices

Increased demand from the electric power sector, coupled with decreased NG production, has led to competition for NG within the U.S. economy. Residential, commercial, industrial and electrical demand has created an internecine competition for NG resulting in steadily higher NG prices. Wellhead prices per mcf have increased from $2.95 in 2002 to $5.49 in 2004 to over $8.00 in January 2006.

Higher NG prices have several major effects on the economy. First, escalating prices directly increase home heating bills, which acts as a tax on consumers and crowds out expenditures on other items in the consumers’ budget, such as consumer durables and other forms of discretionary spending.

The second major impact involves inflation. Higher natural gas prices increase the costs of production electricity and other natural gas intensive commodities, such as fertilizers, glass and metals. These price increases then set off a round of cost-push inflation that reverberates through other sectors of the economy. Higher price inflation leads to higher interest rates, which diminish investment in plants and equipment. With lower real income and higher costs, employers reduce their demand for labor and employment drops.

Moreover, additional output and employment losses may occur if higher natural gas prices reduce the international competitiveness of the industrial base. Such an outcome has severe consequences for the manufacturing base of the United States, where over 3.1 million jobs were lost from 2000 to 2005 alone. Figure 3.10 shows the price increases in NG since 2000 to industrial consumers:

Thus, the increase for price to industrial customers from 1999 to 2005 price was $4.80 per mcf, or 154%. These increases have had a steadily expanding adverse impact on the manufacturing sector and have removed both competitiveness and stability from the industrial planning process regarding the commodity.

The U.S. Department of Commerce Economics and Statistics Administration (ESA) recently estimated the magnitude of these economic impacts from rising natural gas prices. Using an inter-industry model of the U.S. economy, the ESA simulated how the economy would have performed if natural gas had not increased so dramatically from 2000 to 2004. Specifically, they conducted a simulation of the economy with natural gas prices only 60% of actual natural gas prices for each year from 2000 through 2004.

During the first two years, ESA found the growth in real gross domestic product is 0.2 percentage points lower in each year, representing a cumulative loss in economic output of roughly $40 billion. According to the ESA study, on average between 2000 and 2004, annual total civilian employment was 489,000 lower due to higher natural gas prices. Manufacturing jobs comprised about 16% of that loss, or about 79,000 jobs per year. These output   and employment losses are compounded with the additional natural gas price increase during 2005.

Another concern with higher natural gas prices is that manufacturers would decide to shift production and investment capital to foreign countries with lower natural gas prices. The evidence for this activity, however, is more difficult to establish. What is known is that U.S. manufacturing firms invested about $28 billion abroad in 2003, representing 17% of capital spending in this sector. The impact of higher natural gas prices on these decisions must be examined on a case-by-case basis. Apart from these macroeconomic investment data, the case for a loss in competitiveness of U.S. chemical industries to Middle Eastern producers with very cheap natural gas is compelling, especially since most new chemical production capacity is going into that part of the world.

Impacts on Industry

The economic activity of the U.S. industrial sector is critical to the success of the entire U.S. economy. This sector provides the goods and materials that are used throughout the remainder of the economy to provide the quality of life that Americans have come to expect.

The industrial sector as a whole used approximately 25 Quads (quadrillion Btu) of energy in 2001 (neglecting energy losses experienced in energy generation and transmission). The source of this energy is shown in Figure 3.11.

Energy in the industrial sector is used in two ways. The bulk of the energy, approximately 70% (17.5 Quads), is electricity or fuels burned to generate the heat and power needed in industrial processes. The remainder of the energy is used as a raw material to produce products such as polymers, petrochemicals, agricultural chemicals and fertilizers and lubricants and waxes.

Industrial Technology Program “Industries of the Future”

In the early 1990s, the U.S. DOE designated the nine most energy-intensive industry sectors as “Industries of the Future” (IOF). Since then, this concept has been incorporated under a broader Industrial Technologies Program (ITP), but the IOF classification is useful for discussing industrial energy use. The nine industries included in the IOF designation—agriculture, aluminum, chemicals, forest products, glass, metal casting, mining, petroleum refining and steel—account for approximately 67% of industrial energy consumption. Under this effort, a number of specific programs were established to support research, development, demonstration projects and best-practice adoption within these sectors in an attempt to reduce the energy intensity of production and improve the bottom line of companies operating in these industry sectors. According to the ITP website, recent tracking results indicate that the ITP’s projects have cumulatively saved over 1.6 quadrillion (1015) Btu—valued at about $6.5 billion.

The profile of energy consumption within the IOF sectors is shown in Figure 3.12. The IOF sectors represent the materials and basic manufacturing portion of the U.S. industry.

Even in the absence of the data in the table, it could be expected that the energy use patterns between these industry sectors would vary dramatically, given the wide range of manufacturing operations represented. For example, electrical consumption varies from a low of ~3.5% to nearly 56% among these sectors, and other fuels vary from less than one percent to over 66%. However, gaseous fuel consumption (represented by natural gas, LPG and NGL) is the one energy source that finds consistently significant use across all the IOF Sectors, as shown in Figure 3.13.

It should be remembered, however, that energy consumption as fuels represents only 70% of industrial energy use. The use of “energy” (natural gas, petroleum) as a raw material represents 30% of the industrial energy use, and nearly all of this energy use occurs in chemical and petroleum refining sectors. A first approximation is that the chemical sector uses gaseous raw materials and the petroleum sector liquid-based raw materials. Using this assumption, approximately 40% of the raw material “energy” used in the industrial sector is in the form of natural gas-like materials, or 12% of the total energy use. As a result, it is safe to assert that nearly 50% of the energy used in IOF sectors is represented by gaseous fuels and, consequently, nearly 50% of industrial energy consumption might be derived from coal-generated synthesis gas that could be burned as fuel or converted to hydrocarbon raw material streams through various catalytic processes.

The nine IOF industries account for approximately 67% of this energy use. Fifty percent of the energy used in these sectors is estimated to be from gaseous sources, such as natural gas, liquefied petroleum gas (LPG) and natural gas liquids (NGL).

Two Industries at Risk: Chemical and Glass

Based on data from the “Energy Use, Loss and Opportunities” report prepared by Energetics and E3M, Inc., two primary conclusions can be drawn:

• The chemical sector usage of gaseous materials accounts for 74% of its energy.
• In the glass sector, more than 76% of the energy consumed is in the form of natural gas.
• A brief discussion of these two industries provides insights into the problems they encounter with escalating NG prices.

The Chemical Industry

It has been well documented that increasing NG prices have hit the chemical industry particularly hard. Chemical manufacturers use about 12% of the NG in the United States in a full range of processes from heating to power   to feedstock.

Further, the chemical industry is an important component of the nation’s economy, since, in addition to using 12% of United States’ NG, the industry:

• directly employs almost 900,000 people;
• generates more than $500 billion for the economy;
• is the leading American export industry;
• is America’s second largest rail shipper; and
• accounts for one of 8 new patents.

With substantial increases in the price of NG, however, chemical companies have been forced to make significant changes in their operation to compete on a global basis. Dow Chemical has been forthright about the steps it has taken to adjust to the increase in NG prices. Since 2002, Dow has:

• shifted some production to such countries as Kuwait, Argentina, Malaysia and the Netherlands, where energy prices are more competitive;
• eliminated 6,500 jobs;
• announced plans to build major new production facilities in Oman (2004), Kuwait (2005) and China (2005); and
• closed production facilities throughout the United States including Texas (four), Michigan, West Virginia (two), New Hampshire, New Jersey (two), and Kentucky.

Dow’s actions are representative of the trend in the industry. An analysis by Business Week revealed that of 120 large-scale chemical plants being built throughout the world, only one is being built in the United States. The U.S. Department of Labor has summarized the vulnerability of the chemical industry in the United States:

“Foreign competition has been intensifying [in] the chemical industry…rapidly expanding foreign production capabilities should intensify competition…shifting operations to locations in which the costs are lowest. U. S. companies are expected to move some production activities to developing countries—three in East Asia and Latin America, for example…”

Accordingly, the Department of Labor projects that the chemical industry will lose as many as 200,000 jobs by 2012.

The Glass Industry

Although each of these nine IOF sectors is under severe competitive pressures, none is under more stress from escalating energy prices than the glass industry, where more than 75% of the energy input is in the form of NG. Even at $3.50 per mcf, the industry was paying 15% of its total manufacturing costs for energy. With January 2006 NG prices over $8.00 per mcf, energy costs may exceed 20% of manufacturing costs. Before these rapidly increasing energy costs, job losses resulting from decisions with at least a partial energy component were estimated to be 10% of the glass workforce nationwide. The current costs of NG are almost certain to spur an additional round of energy-related plant closures in the glass industry.

The glass industry is divided into four sectors. Container glass, the largest sector in tons, includes all glass packaging products. The flat glass sector is principally made up of window glass, but also includes architectural and decorative glass panels. The glass fiber sector produces fine strands of glass for textile and glass wool insulation applications. The specialty material sector includes glass applications including lighting, tableware, optics, optical wave guides, stepper cameras for integrated circuits and others.

According to the U.S. Census Bureau, the cumulative sales of the glass industry in the United States were about $27 billion in 2003. The industry employed approximately 126,000 in 2003, with an overall payroll of approximately $5 billion. This nearly $40,000 per year salary is above average for U.S. industry. The nature of the glass industry in the United States has changed in recent years. Originally, the vast majority of domestic glass facilities were owned by U.S. companies. A growing trend now is foreign ownership of U.S. glass facilities. Saint Gobain, the largest glass manufacturer in the world, is now a major player in U.S. container and fiberglass manufacture; Pilkington has purchased Libby Owens Ford glass facilities; ARC is a French tableware producer and AFG float glass is owned by Asahi.

In addition to the presence of significant foreign ownership of domestic glass production, there has been shrinkage in domestic company participation in all sectors. Corning, Inc. employment was reduced from 41,000 to 20,000 between 2001 and 2004. About 8,000 of the 21,000 jobs were in the traditional glass areas, such as the lighting products plant in Greenville, Ohio; the electrical products CTV plant in State College, Pennsylvania; the Corning, New York CTV tube plant; and the Martinsburg, West Virginia, consumer products plant that had previously been sold by Corning to World Kitchen. Other companies experiencing closures were Thomson Consumer Electronics in Circleville, Ohio; Techneglas’ Columbus, Ohio, and Pittston, Pennsylvania plants; and two Anchor plants. Most of these closures were solely related to product obsolescence and lower labor/benefit costs in overseas locations.

A number, however, had direct links to increased energy costs including plants at Corning, Thomson, Techneglas, Anchor, Gallo and Libby Glass. Estimated employment losses with a partial energy cost cause are approximately 15,000—or slightly more than 10% of total employment.

Figure 3.14 shows the decrease in glass furnaces in North America in just three years. Most closures have been in the United States.

Information developed in DOE-funded studies by Energetics indicate that natural gas represents over 75% of the energy used in the domestic glass industry. Until 2000 NG prices were relatively steady, but significant increases in recent years have taken the average cost of this critical energy source to over $8.00 per mcf. Recent experiences graphically illustrate the volatility of the natural gas markets in the United States as spot prices exceeded $13.00 in the fall of 2005.

With gas prices at $3.50 per MMBtu, energy costs to the glass industry were about 15% of total costs for  specialty products, flat and textile fiber and 10% for container and wool insulation. Batch costs and more energy per ton for other products raise the proportional cost of energy. If the prices being approached by the January Futures contract are maintained, energy costs for the glass industry may well reach and possibly exceed 25% of total costs. In this scenario, the glass industry will experience a continual downward pressure on already marginal profits, leading to a point of marginal viability. Further plant closings and employment reductions in the glass industry will result. The other eight IOF sectors will face similar pressures, but perhaps not to the same degree.

One Solution: Coal Gasification and Glass Manufacture

The increased cost of natural gas is of growing concern to the domestic glass industry, hence the industry’s desire to investigate the possibility of alternative gaseous combustible energy sources. Coal gasification presents one option for accomplishing this end. In gasification, solid coal is converted into a stream containing CO and H2 commonly called “synthesis gas” or “syngas” for short. Syngas streams can be used as produced as a fuel or can be manipulated catalytically into methanol or hydrocarbons of varying molecular weights. Preliminary work has already been done in planning design characteristics for coal gasification plants for the industry.

Examples of industrial applications of coal gasification include the following applications identified in a cursory search by Oak Ridge National Laboratory (ORNL) personnel:

• Gasification of Kraft liquor is used to produce process heat (and/or power) for the pulp and paper industry. Ongoing research on this process and on the related materials issues is funded by the DOE Office of Energy Efficiency and Renewable Energy.
• Gasification of coal is used to produce gas for domestic and industrial heating and lighting (“Town Gas”), widely practiced in Europe during and after WWII.
• Gasification of agricultural waste and biomass on a small, local scale is used for domestic and industrial consumption, which is fairly widely practiced in Europe.
• Domestic and South African facilities produce methanol and hydrocarbons through catalytic conversion of synthesis gases generated from coal.

Glass plants vary enormously in plant size and energy use. Commercial plants range from 80 million to 300 million Btu per hour. While this may seem like a lot of energy, it would require as many as eight Gallo wine bottle plants (the largest container glass plant under one roof in the United States) to consume the output of one Tampa Electric Company-sized coal gasification demonstration plant.

This being the case, three scenarios can be discussed which would make it practical to use coal gasification in the glass industry (and likely for most other industrial facilities as well):

• smaller gasification plants would have to be developed and proven viable;
• a number of industrial users in a single area would be assembled to consume the output of a large gasification plant; or
• one or more industrial facilities would share a portion of the output of a gasification plant built for electrical generation.

In any of these cases, a number of critical technical, environmental and economic concerns would have to be addressed in order to make the wholesale substitution of coal-derived syngas for natural gas a reality. These issues include:

• development of the necessary materials of construction, process equipment and process design for a gasification plant with a high degree of on-stream time and high-process reliability;
• development of an environmentally acceptable coal-based gasification system; and
• demonstration of commercially viable, small-scale gasification plants.

Even though there are established facilities generating fuels and raw materials from gasified coal and biomass, there are a number of issues associated with the gasification process that are still being addressed through research programs. The ORNL has provided the following list as an example of the types of projects being undertaken:

• Degradation of the refractory linings of the gasification vessels — This is being addressed by ongoing research under the DOE Office of Fossil Energy’s Advanced Research Materials (ARM) program.
• Premature loss of control sensors (e.g., thermocouples) in the gasification vessel due to high-temperature corrosion/sulfidation — Some research in this area is being conducted under the DOE’s ARM program.
• Degradation of the burner nozzle tips due to high-temperature oxidation/sulfidation — Ongoing trials at the ORNL using iron aluminide tips are showing promise.
• High-temperature corrosion of the components of the hot gas cooler — This has been researched extensively in the past, resulting in the use of higher-grade alloys than initially planned for the heat exchanger and, in power generation applications, having a replacement hot gas cooler available on-site for rapid replacement.
• Hot gas filtration (where used): plugging, breakage and corrosion of ceramic and metallic filters — Recent experience in power generation IGCC plants has been that certain metallic filters give acceptable, predictable performance where good control measures are practiced.
• Aqueous corrosion from recycled water (“grey water”), depending on the fuels used — Where water quenching/scrubbing of the gas is employed, there may be issues with this phenomenon.
• Combustion of the product gas: differences in combustion characteristics compared to natural gas can bring some control issues — Depending on the degree of gas cleaning, there can be issues of deposition, corrosion or erosion of components touched by the flame.

Combustion practices in the glass industry have been tending toward oxy-fuel installations. These installations should be able to use synthesis gas without too many problems. A simple change in the oxygen/fuel ratio from 2:1 to 1:1 would compensate for the CO:H2 mixture in the syngas. Nevertheless, traditional air-fired regenerative furnaces may find that the lower Btu value of syngas would result in greater generation of NOx than would be allowed under EPA regulations.

These issues and others represent the barriers to the use of gasification broadly for industrial fuel applications. Solving these issues will require a substantial investment of high-caliber technical resources; the expenditure  of substantial sums of money for research, development and demonstration projects; and project management and coordination talent. The effort is of a scale such that only the federal government would have the resources and abilities to bring it to a successful conclusion. We urge the Department of Energy to consider developing and securing funding for a program that would use the vast coal resources of this nation to increase the availability of gaseous fuels and reduce the pressure on natural gas prices for industrial, commercial and residential markets.

The 10 largest coal producers and exporters in the Indonesia:

1. Bumi Resouces
2. Adaro Energy
3. Indo Tambangraya Megah
4. Berau Coal
5. Bukit Asam
6. Baramulti Sukses Sarana
7. Harum Energy
8. Mitrabara Adiperdana 
9. Samindo Resources
10. United Tractors

Source: The National Coal Council