INSIGHT: US is closing in on yet another natural gas bonanza

03 May 2012 14:39  [Source: ICIS news]

By Joe Kamalick

Gas flaring at the Alaska methane hydrates test wellWASHINGTON (ICIS)--The US may be closing in on another game-changing bonanza in natural gas resource development that could profoundly alter the nation’s energy profile within a few decades, much as shale gas production has since the 1970s.

The US Department of Energy (DOE) said this week that substantial progress has been made in developing the production of methane from abundant domestic gas hydrate resources.

The department said that ConocoPhillips and a Japanese company have completed a successful and unprecedented demonstration of sustained natural gas production from methane hydrate deposits in Alaska.

ConocoPhillips and the Japan Oil, Gas and Metals National Corporation (JOGMEC) successfully achieved a steady flow of natural gas production over a 30-day period from a methane hydrates field in the North Slope of Alaska.

The previous duration production test of natgas output from hydrates ran only six days in 2008.

“While this is just the beginning, this research could potentially yield significant new supplies of natural gas,” said Energy Department Secretary Stephen Chu.

He said that based on the hydrates production test that was concluded on 10 April, the department plans to spend some $11.5m (€8.74m) over this year and next on additional field work “to conduct a long-term production test in the Arctic as well as research to test additional technologies”.

Those additional production technologies, along with the technique used on the North Slope in last month’s test, “could be used to locate, characterise and safely extract methane hydrates on a larger scale in the US Gulf Coast”, the department said.

Methane hydrates – also known as natural gas hydrates or just gas hydrates – consist of an open, solid lattice of water molecules that enclose, without chemical bonding, molecules of methane. 

Gas hydrates are stable at varying levels of pressure and temperature, even up to 50° Fahrenheit (10° Celsius), although generally they are found at low but not necessarily freezing temperatures.

When heated or removed from their usually high-pressure environments, the hydrates release methane, the principal component of natural gas.

While the methane gas from hydrates would not directly benefit the general petrochemicals industry – which needs the ethane from conventional natural gas for feedstock – it could be abundant raw material for methanol production.

Perhaps more significantly, a large influx of hydrates gas into the North American energy marketplace would help keep prices low for the natural gas feeds so important to chemical producers.

A rising tide of natural gas supplies would raise all boats in production and manufacturing industries.

Along the US Gulf Coast, according to a 2009 study by the US Geological Survey (USGS), there are gas hydrate deposits totalling some 21,436,000 bcf (or 21.4 quadrillion cubic feet), much of which is recoverable.

An earlier 2007 DOE research project in the Prudhoe Bay region of Alaska demonstrated that seismologists could reliably predict the location of commercial concentrations of gas hydrates in arctic permafrost.

The 30-day North Slope demonstration production completed last month used a new recovery process that ConocoPhillips developed in collaboration with the University of Bergen in Norway.

It involves the injection of carbon dioxide (CO2) and nitrogen into a hydrates deposit, lowering pressure in the formation, freeing methane and replacing it with CO2.

The process, said DOE, has the added benefit of sequestering CO2.

Although no one really knows how much gas may reside in methane hydrates, a 2009 study by the US Congressional Research Service (CRS) estimated that the US has as much as 320,000,000bn cubic feet (bcf) (320 quadrillion cubic feet) of gas-bearing hydrates in onshore and offshore deposits.

The US consumes about 24,000 bcf of natural gas annually.  The maths of hydrates gas potential consequently is almost laughable. Against that pace of US annual natgas consumption, gas hydrate resources in theory could meet domestic demand for almost 13 millennia. 

Absurd, of course, because there is no immediate technical prospect for recovering all or even most of the estimated hydrates resources.

But if even a fraction of methane hydrate resources can be commercially developed, they could supply US natgas needs for centuries.

ConocoPhillips said that the North Slope test production run of last month “is an important step in developing production technology to access this potential resource while sequestering carbon dioxide”.

The company said that after two weeks of CO2 and nitrogen injection at the North Slope site, “gas production averaged 33,000 cubic feet per day (33 mcfd) with peak production of 175 mcfd”.

That peak level of daily output is within the low-end range of conventional gas well production, which according to the US Geological Survey can be as little as 160 mcfd and (in the early days of US gas production) as much as 435 mcfd.

Neither ConocoPhillips nor DOE said what the cost of the test production run was, but it is not likely to be competitive in today’s marketplace where the abundance of shale gas output has pressed recent natgas prices to the $2.00/MMBtu range and even lower.

But the North Slope gas hydrates production test was not meant to be market competitive.

“The test was designed to prove the technical feasibility of the production technology, which it accomplished successfully,” ConocoPhillips said.

“Production tests of gas hydrates to date have been short-term and have not demonstrated commercial viability,” the company added, noting that “The potential supply of a clean fossil fuel [from gas hydrates] will remain untapped unless a technically and economically feasible means of producing methane from hydrates is found.”

“While the test was successful, the potential for commercial production of natural gas from methane hydrate deposits is still far in the future,” Conoco Phillips concluded.

While not overstating the case, the DOE was more enthusiastic about the North Slope hydrates development.

The department said that the next step would be to evaluate gas hydrate production over longer durations, “with the eventual goal of making sustained production economically viable”.

While that goal may take years to accomplish, said Chu, “the same could be said of the early shale gas research and demonstration efforts that the department backed in the 1970s and 1980s”.

Senator Lisa Murkowski (Republican-Alaska) also was decidedly more upbeat about the North Shore test results.

“The success of this test is wonderful news for Alaska and America,” she said on Wednesday this week.

Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee and sponsor of the legislation funding DOE’s gas hydrates research, said that “The results announced today represent a major step toward unlocking America’s, and especially Alaska’s, nearly inexhaustible supply of methane hydrate energy.”

($1 = €0.76)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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