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Forget the shale gas revolution that has transformed North America’s energy landscape. The energy of the future could lie buried deep underneath the world’s oceans and the Arctic permafrost: giant reservoirs of gas trapped in ice crystals.
Sometimes called flammable ice, these methane hydrates also hold out the potential to alter trade flows and the geopolitics of energy. Countries such as Japan and India, which rely heavily on energy imports, could suddenly find themselves important energy suppliers. Late last year, China announced it had identified a big gas hydrate reserve in the northern part of the South China Sea.
It is very early days. Test drillings have so far taken place only in Canada and Japan, but the International Energy Agency, the western world’s energy watchdog, does not rule out the possibility of another energy revolution to rival that of the shale boom in North America.
Maria van der Hoeven, the IEA’s executive director, said in an interview last year: “There may be other surprises in store. For example, the methane hydrates off the coasts of Japan and Canada ... This is still at a very early stage. But shale gas was in the same position 10 year ago. So we cannot rule out that new revolutions may take place through technological developments.”
Methane hydrates are deposits of natural gas trapped with water in a crystalline structure that forms at low temperatures and moderate pressures. Although estimates of the resources vary widely, experts agree they are extremely large. According to the IEA’s most recent World Energy Outlook published last autumn, even the lower estimates give resources larger “than all other natural gas resources combined”.
Many estimates fall between 1,000tn and 5,000tn cubic metres, or between 300 and 1,500 years of production at current rates. The US Geological Survey estimates that gas hydrates worldwide are between 10 to 100 times as plentiful as US shale gas reserves.
However, although several governments have investigated methane hydrates since the early 1980s, no country has been especially focused on developing them. Exploiting them has to make sense from a cost perspective. There have also been other sources of fossil fuels – notably conventional oil and gas and more recently shale – that have been easier and cheaper to access.
Things changed early last year. In March, Japan became the first country to get gas flowing successfully from methane hydrate deposits under the Pacific Ocean. The country has a big reason to pursue methane hydrates. After shutting down most of its nuclear power stations three years ago after the crisis at its Fukushima nuclear plants, the country has relied on expensive imports of liquefied natural gas from countries such as Qatar.
Before the Fukushima disaster, nuclear provided about 30 per cent of Japan’s power generation, compared with LNG at 25 per cent. Since that time, LNG’s share has soared to 45 per cent. The increasing energy imports have helped drive the country’s trade balance into deficit.
According to Paul Duerloo, partner and managing director at Boston Consulting Group in Japan, the country tops the list of those with an incentive to develop their methane hydrate deposits. Japan, he says, is paying about $15 per million British thermal units (mBTU), compared with the US Henry Hub price of just $4-$5.5 per mBTU and a price of well below $10 per mBTU in Europe.
The country, adds Mr Duerloo, has few alternatives in terms of energy sources and is keen to become self-sufficient.
The resource could be enormous. Japan Oil, Gas and Metals National Corporation, the state oil group, estimated in 2008 that 1.1tn cubic metres of methane hydrates lay beneath the eastern Nankai Trough, enough to offset at least a decade’s worth of foreign gas imports.
Even so, huge challenges remain before natural gas can be produced from these reserves and the relevant extraction technology is still in its infancy. Hydrates form under high pressure caused by the weight of the seawater or rock above them. That pressure needs to be maintained when the sediment cores are analysed or else the hydrates within quickly dissociate into water and gas.
There are also concerns about what the release of methane, a potent greenhouse gas, could do to the atmosphere.
To extract the gas last March, the Japanese team used conventional methods. These involved first lowering a drill about 1,000m to the bottom of the Nankai Trough. They then had to drill another 300m into the rock, drain the water out of the hydrate layer to lower the pressure in the deposit and free the methane gas which was then pumped to the surface.
Nevertheless, more work needs to be done. Researchers in Japan hope to develop production technology that achieves controlled release of the methane from the ice into the production well, thereby minimising the risk of gas escaping into the atmosphere.
According to the IEA, “the longer-term role of methane hydrates will depend on climate change policies as well as technological advances, as meeting ambitious goals to reduce emissions could require a reduction in demand from all fossil fuels, certainly in the longer term”.
Japan has set itself the target of bringing methane hydrates into the mainstream by the early 2020s. Despite the significant challenges, Mr Duerloo believes the world should not underestimate its dedication, inventiveness and willingness. “I think the chances they pull it off are more than half.”
This article has been corrected since original publication to reflect the fact that Japan and India rely heavily on energy imports.