LNG faces challenge from methane hydrates in Japan

Douglas Westwood has released a report that poses the question, ‘Could Methane Hydrates Challenge LNG in Japan?’

While the shale gas boom has taken off, transforming the energy industry, other sources of natural gas have not been exploited. Methane hydrates, the report states, is the ‘dark horse’ of future energy. Methane hydrates, commonly known as ‘burnable ice’ are a potential significant resource of natural gas.

Vast resource

The hydrates are most stable at low temperatures and high pressure, which is why they are found below deep waters and in arctic regions. In theory, the report states, methane hydrates could “revolutionise the energy industry, potentially providing significant upside to natural gas production”. However to date there have been no commercial scale developments of this vast resource.

While companies have discussed the possibility of development in the Gulf of Mexico and in Columbia, it is the possibility for commercialization offshore Japan that remains the most interesting. A large-scale development could considerably impact the country’s existing and growing energy trade deficit.

Largest LNG buyer

Japan is the largest LNG buyer in the world, importing 70 million tpa of LNG in 2012, twice the levels of South Korea, the second largest LNG importer. Should methane hydrates become a commercially viable energy source, Japanese LNG imports could be impacted, as could the wider LNG industry.

It is currently unknown whether methane hydrate projects offshore Japan can be commercialised at a competitive price. There are also significant technical issues to address, not least that the most viable accumulations are located in difficult environments, posing technical and environmental challenges.

Positive results

Natural gas prices in Japan are currently four times that of US levels. The country evidently has a greater incentive to capitalise on such a development, and has been drilling in its Nankai Trough since 1999.

In March 2003, Japan produced 120 000 m³ of methane gas from a depth of 1000 m. It is reported that if test drilling continues to yield positive results and if technical issues can be resolved, commercial production could begin as early as 2018.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/17022014/methane_hydrates_pose_risk_to_japanese_lng_177/