The lesson to take from the history of oil and gas is that companies are always looking for the next frontier. They seek to invest in technologies that will reduce cost, increase efficiencies, and enable the recovery of challenging reserves. Few have heard of methane hydrates, gas molecules trapped within a crystalline lattice that look like white ice, but they might just be the next energy frontier.
In the aftermath of the 1973 energy embargo, the government launched a search for alternatives to oil and policies to promote energy independence. One of the alternatives was shale oil. Back then, recovering shale involved mining and heating. Union Oil developed a product that cost almost twice the price of conventional crude oil–$42 per barrel versus $24. The plant was shut down in 1991 because of falling crude oil prices and technical challenges.
Although the Union Oil project did not pan out, companies continued the search for a way to unlock the great reserves of shale oil and gas. A long-term outlook and commitment to technology finally led to the development of 3D seismic, horizontal drilling, and hydrological fracturing, which has been the foundation of the U.S. energy renaissance.
While attention and subsidies have focused on wind, solar, and electric vehicles over the past two decades, the Energy Department, some oil companies, and countries such as Japan have been investing in the potential recovery of methane hydrates.
The U.S. Geological Survey estimates that gas hydrates hold more carbon than the world’s other fossil fuels combined, from 10,000 trillion cubic feet to more than 100,000 trillion cubic feet of natural gas, most below the ocean floor.
While the resource base is enormous, the daunting challenge is how recover these hydrates safely and economically. When methane hydrates are exposed to less pressure and higher temperature conditions then those at the seabed floor, the crystalline solid turns to water and the methane molecules are released as gas unless they are quickly refrigerated.
Last year, the United States and Japan, along with ConocoPhillips, announced the world’s first successful field trial (in Alaska) of a technology that uses carbon dioxide to free natural gas from methane hydrates in the sea bed. The Global Warming Policy Forum stated, “Methane hydrates constitute the world’s No. 1 reservoir of fossil fuel. Ubiquitous along vast stretches of Earth’s continental shelves, they hold enough natural gas to fuel the world for a thousand years – and beyond.”
Given the large reserves of shale gas in the United States, and the current low price of natural gas, oil and gas companies are not pressing ahead at a rapid pace. But, that is not the case with Japan, which is highly dependent on imports which presently run over 80 percent total primary energy use. Japan is the largest importer of LNG in the world. The potential for reducing those imports and the consequences from the 2011 nuclear accident have resulted in a high priority for methane hydrates.
In 2013, a Japanese drilling ship successfully extracted methane hydrates from the seabed off Central Japan (the Nankai Trough) by simply lowering the reservoir’s pressure without resorting to heating. Ryo Minami, director of the oil and gas division at Japan’s Agency for Natural Resources at the time, estimated that methane hydrates may be at the stage where shale gas was 10 years ago. If he is correct, Japan could start the commercialization of methane hydrates in around 10 years. Whether that estimate is too optimistic depends on continued advances in technology, lowering recovery costs, and successfully addressing the hazards of dealing with an unstable resource.
Engineering and technology can address the technical and safety issues involved in methane hydrate production but the economic forces are not within Japan’s control. The price of gas would have to reach $5.57 to $8.91 per Mcf—2 to 3 times the price of natural gas– for production to be commercially viable.
Breakthroughs in technology can rarely be predicted. However, the lesson learned from fracking is that new sources of energy can arise unexpectedly. Perhaps the same will be true of methane hydrates.
from - Economics21.org - by William O'Keefe