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Oil, gas and coal: how they form, are found, moved and priced: Natural gas, LNG, shale and coal's future

Understanding Energy / Module 6: Oil, gas and coal: how they form, are found, moved and priced Part 5 of 5

Natural gas, LNG, shale and coal's future

Natural gas is the cleanest-burning fossil fuel and the main feedstock for nitrogen fertiliser, but it is bulky and costly to move. Liquefaction turned it into a global commodity, and 2026 showed how exposed that trade is. Coal, the dirtiest fuel, has proved far more persistent than many forecast.

5.1 Methane burns cleanly, but its low density and leaks are the catch

Natural gas is mostly methane, CH4, the simplest hydrocarbon: one carbon atom bonded to four hydrogen atoms. That high ratio of hydrogen to carbon means more of the energy released in burning comes from forming water rather than carbon dioxide. Per unit of energy, burning gas emits a little under 60% of the CO2 of coal and about a quarter less than crude oil (IPCC default factors).

Gas is easy to control, which suits it to cooking, space and water heating, and industrial furnaces that need precise temperatures. In power generation the combined-cycle plant is its strongest card. A gas turbine burns the fuel and drives a generator; its exhaust, still at 550 to 650 degrees C, raises steam for a second turbine. The best plants convert about 60% of the fuel's energy to electricity, far above coal plants. Gas is also the main source of hydrogen for making ammonia by the Haber-Bosch process, so it indirectly feeds a large share of humanity through nitrogen fertiliser.

The drawbacks follow from its physical form. At normal pressure a cubic metre of gas holds only about 36 MJ, roughly a thousandth of the energy in the same volume of oil. It must be compressed into high-pressure pipelines with compressor stations every hundred kilometres or so, stored in depleted fields or salt caverns to meet winter peaks, and delivered through local networks.

The other catch is leakage. Methane is a far stronger greenhouse gas than CO2 over the first few decades after release. Smil reviewed evidence that well-run systems lose well under 1% of their gas, but high leakage from wells, compressors and old city pipes can erase much of gas's climate advantage over coal.

Process flowchart From gas to electricity in a combined-cycle plant
Inputs Natural gas1 cubic metre, about 36 MJ Process steps 1 Gas turbine

combustion at over 1,400 degrees C drives the first generator, about 38-40%

2 Heat recovery steam generator

hot exhaust raises steam

3 Steam turbine

drives a second generator, adding about 20 percentage points

Outputs Electricityabout 21-22 MJ (about 60%) Low-grade heat to stack and coolingabout 14 MJ Source: Smil, Two Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines (2010), via Smil Mastery Course, M6 'Natural gas: the cleanest fossil fuel'

5.2 LNG turned gas into a global trade, and 2026 exposed its fragility

Pipelines work well within continents, but they cannot cross oceans economically. The answer is liquefied natural gas. Cooling methane to about minus 162 degrees C turns it into a liquid with about one six-hundredth of its original volume, which can be pumped into insulated tankers. At the receiving end it is warmed back into gas and fed into the grid. LNG has turned gas from a set of regional markets into a global one.

The chain is expensive and costs energy. Liquefaction plants are among the largest industrial projects in the world, and the refrigeration burns a noticeable share of the gas, commonly put at up to about a tenth. Boil-off at sea and regasification take a little more. LNG prices in Asia are therefore usually well above pipeline gas prices in the United States.

Before 2026 the IEA expected a wave of new LNG capacity, much of it from the United States and Qatar, to loosen markets in 2026 and beyond. The Hormuz closure reversed that. About 110 billion cubic metres of LNG, almost a fifth of world supply, had passed through the strait in 2025, all of it from Qatar and the UAE. Production at Ras Laffan in Qatar, the world's largest liquefaction complex, was halted after an attack on 2 March 2026. The IEA's Q3 2026 Gas Market Report expected Qatari and Emirati LNG supply to fall by about 45%, or 54 bcm, in 2026, and the Asian benchmark price averaged about $17.5 per million British thermal units in the second quarter, 45% higher than a year earlier.

Process flowchart The LNG chain
Inputs Natural gas at the field100 units of energy Process steps 1 Processing

remove water, CO2, sulfur and heavier liquids

2 Liquefaction to minus 162 degrees C

volume shrinks about 600 times; refrigeration uses several to about 10 units

3 Shipping in insulated tankers

a little cargo boils off each day, often burned as ship fuel

4 Regasification

warmed back to gas at the import terminal, a unit or two

Outputs Gas delivered to the gridroughly 85-90 units

Illustrative orders of magnitude, not measured values for one chain; long voyages and older plants lose more.

Source: Smil, Natural Gas: Fuel for the 21st Century (2015), via Smil Mastery Course, M6 'Natural gas: the cleanest fossil fuel'

5.3 Coal is far more persistent than its critics expected

Coal has been declared finished many times. Yet the Energy Institute's Statistical Review 2025 recorded world coal use in 2024 at about 165 EJ, a new record. More than four-fifths was burned in the Asia-Pacific region, and more than half in China alone. Coal-fired plants generated about 10,600 TWh, roughly a third of the world's electricity, still the largest single source.

The reasons are practical. Coal is abundant in China, India, Indonesia and Australia, it is cheap to mine at scale in open pits, and it can be stockpiled at power stations for weeks. Many Asian coal plants are young, with decades of technical life left. In steelmaking, coking coal remains essential for the blast furnace route that makes most of the world's steel, and hydrogen-based alternatives are only beginning to be built.

For India the picture is sharp. Coal supplies most of its electricity, and domestic output reached about 1,048 million tonnes in 2024-25, the first year above a billion. Solar and wind are growing quickly, but rising demand for power means coal output has continued to climb alongside them.

Coal's burdens are the heaviest of any fuel. It emits the most CO2 per unit of energy, about 1.7 times as much as gas. Burning it without modern controls releases sulfur dioxide, nitrogen oxides, fine particles and mercury, and leaves vast amounts of ash. Mining scars land and, underground, remains dangerous. Coal is therefore the largest single source of energy-related carbon dioxide, and its trajectory in China and India will do more than anything else to decide global emissions in the next two decades.

Data The three fossil fuels compared
FuelWorld use 2024CO2 per unit of energyMain uses
Oilabout 199 EJ (over 101 mb/d)medium, about 73 kg per GJtransport, petrochemicals
Natural gasabout 149 EJ (about 4,124 bcm produced)lowest, about 56 kg per GJpower, heating, industry, ammonia
Coalabout 165 EJ (record)highest, about 95 kg per GJelectricity, steel, cement

Use from the Energy Institute Statistical Review 2025; emission factors are IPCC 2006 defaults (crude oil, natural gas, other bituminous coal).

Source: Energy Institute (2025). Statistical Review of World Energy 2025, 74th edition (2024 data). London: Energy Institute., https://www.energyinst.org/statistical-review; full report as hosted at https://assets.kpmg.com/content/dam/kpmgsites/sg/pdf/2025/08/2025-statistical-review-of-world-energy.pdf (oil 199 EJ, demand above 101 mb/d; gas 148.6 EJ, production 4,124 bcm; coal record 165 EJ, 83% Asia Pacific, China about 56% of world (calculated from tables); coal power 10,613 TWh)

5.4 Gas is the best fossil bridge, but fossil fuels will fade slowly

Where gas replaces coal in power generation, emissions fall quickly. In the United States, cheap shale gas pushed coal out of many power stations after 2008, and that switch did more to cut the country's power-sector CO2 than any other single change for a decade. Smil sees gas as the best fossil fuel for the transition: it emits less, pollutes less locally, and gas plants can ramp up and down to balance wind and solar. He also stresses that it is still a fossil fuel, and that its benefit depends on keeping methane leaks low.

Other gas resources add to the picture. Coal-bed methane is extracted from coal seams, and tight gas from low-permeability sandstones. Methane hydrates, ice-like solids of methane and water found in seafloor sediments and permafrost, hold enormous amounts of gas but have not been produced commercially.

The larger lesson is about scale and time. The world burns fossil fuels containing roughly 10 billion tonnes of carbon a year. No alternative can replace that in a decade or two, because doing so means building new generation, grids, storage, vehicles, industrial processes and fuels on a comparable scale. Smil's forecast is therefore a long, uneven decline rather than a quick exit.

The events of 2026 added a twist. High oil and LNG prices cut fossil demand and gave importers such as India new reasons to invest in solar, wind, storage, electric transport and efficiency. Energy security, not only climate, now argues against relying on fuels that must pass one strait.

See it in the table

H₂O WaterOil Crude oilGas Natural gasKc Coking coalS SulfurSt SteelHg MercuryNaCl SaltH2 HydrogenCO2 Carbon dioxideNH3 AmmoniaUr UreaHyd Methane hydrates

Check your understanding

Why does natural gas emit less CO2 per unit of energy than coal?

CH4 has four hydrogens per carbon; coal is mostly carbon.

Roughly what share of world LNG supply passed through the Strait of Hormuz in 2025, according to the IEA?

About 110 bcm, all from Qatar and the UAE.

Where is most of the world's coal now burned?

More than four-fifths of 2024 coal use was in Asia-Pacific.
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