DW: Could Methane Hydrates Challenge LNG in Japan?
While shale gas has been transforming the energy industry, another natural gas source lies unexploited. Methane hydrates, is the ‘dark horse’ of future energy. Commonly known as “burnable ice’, methane hydrates are a potential major natural gas resource. They are most stable at low temperatures and high pressure hence found below deep waters and in the arctic. Methane hydrates could, in theory, revolutionize the energy industry, potentially providing significant upside to natural gas production. However, to date, there haven’t been any commercial-scale developments.
There has been talk about development in the Gulf of Mexico and in Columbia, but most interesting is the possibility for commercialization offshore Japan and how this may impact the country’s existing and growing energy trade deficit. Japan is the largest LNG buyer, importing 70mtpa of LNG in 2012, that’s twice the levels of the second largest LNG importer (South Korea). Should methane hydrates become a commercially viable energy source, Japanese LNG imports could be impacted and possibly the wider LNG industry.
Whether methane hydrate projects off Japan can be commercialized at a competitive price is unknown and there are significant technical issues to overcome, not least that the most viable accumulations are located in difficult environments, posing technical and environmental challenges. Indeed, Canada is abandoning its own 15-year $10 million program.
With natural gas prices at four times US levels, Japan has a greater incentive and has been drilling in its Nankai Trough since 1999. In March 2003, they produced 120,000 cubic metres of methane gas from a depth of 1,000m. It is reported that if test drilling continues to yield positive results and if technical issues can be resolved, commercial production could begin during as early as 2018. But one constant of the energy industry is that most projects take much longer than planned.