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Ever since the discovery of natural methane hydrate in the late 1960's (Makogon et al, 1972), and the subsequent growing awareness of the enormous quantities of methane locked in them (e.g., Kvenvolden, 1993), research scientists have dreamt about recovering this gas to help satisfy the world's demand for energy. The transition from a petroleum to a methane energy economy would also be environmentally positive because methane burns very cleanly, and produces less CO2 per unit of energy than any other fossil fuel. In view of the ever-increasing concern about the environment, methane will likely become the single most important fuel for many decades to come. Natural methane hydrate potentially holds the promise of (i) energy independence to various countries including the USA, India and Japan, and (ii) enabling extending the use of methane and of the existing gas infrastructure.

Yet methane has never been produced from natural methane hydrate on any significant scale. It has been claimed that part of the gas from the West-Siberian Messoyakha field has been produced from dissociating natural hydrate, but this claim is not regarded by some experts (e.g. Collett and Ginsburg, 1997) as being fully substantiated. Other cases of gas production from natural hydrate have been on a test scale only. Broadly speaking, the problems are in the new technical complexities of developing natural methane hydrate, as compared to conventional gas fields. Such technical complexities include finding and characterizing methane hydrate reservoirs, heat and mass flow in the reservoir, and geomechanical stability issues.

These problem areas are being addressed in a number of comprehensive research programmes around the globe. Large sums of money, in excess of US$ 100 million, have been spent over the last five years and continue to be spent. The lion's share of this work is paid by national governments (Japan, USA, India, Canada and others), as opposed to being commercially driven. Said countries have insufficient indigenous energy production causing concerns about energy independence and stability of supply, and/or their governments have a

strong political commitment to environmentally friendly energy. Commercial oil and gas companies, on the other hand, are operating on a worldwide energy market that is mainly driven by price. Indeed, some large commercial energy companies do maintain a research effort in methane hydrate production, but this is on a high risk - high reward basis and the amounts of money spent are nowhere near the US$ 100 million mentioned earlier.

While it would now be technically feasible to produce gas from natural methane hydrate, such an undertaking is indeed not yet economically viable (e.g. BeMent et al, 1998). If we want to discuss the future economic perspective of methane from hydrate, we will first have to judge the prospects of its prime competitor: conventional gas, and indeed of the world gas market as a whole.


Natural gas has been produced almost since the beginning of commercial oil production, in the early days mostly in the form of associated gas (a by-product). However, for a considerable period gas was seen as a nuisance, having little or no commercial value. Often, it was just flared off. In the 1950's and 1960's, both the volume consumed and the price of gas increased, though the price was still substantially below the average oil price (per unit of energy). The 1973 Arab Oil Embargo changed the picture in a fundamental manner. The first World Energy Crisis resulted in a dramatically increased oil price, and provided the incentive for consumers to look for alternative fuels. As a consequence, gas immediately became a commercially marketable commodity. This resulted in a more than 10fold increase in gas price within a few years. Since the early 1980's, the average wellhead gas price has hovered around US$2/1000 cu ft (in the US).

There is consensus that the world at large will continue to see a plentiful supply of inexpensive conventional gas until at least 2020-2030. The majority of gas fields could produce at higher rates than they do now with only slightly higher marginal costs. In addition, a significant number of gas fields that have been discovered await development until the current surplus production capacity has been reduced. This results in the anticipation that the price of conventional gas will remain roughly constant (if corrected for monetary inflation) until at least 2020-2030 (Committee J of International Gas Union, 1997; Beck, 1999; Energy Information Administration, 1998; Cochener, 1999; National Petroleum Council, 1999).

The volumes of gas produced (and consumed) will significantly increase over the same period. Most projections agree that by 2030, the world gas consumption will have increased close to three-fold as compared to the volume in 1999. While much of this growth will derive from fuel substitution in the developed world, the main driver will be increased power demand, particularly in developing countries.

Gas supply and demand are to an increasing degree not well-balanced over the globe, and this trend is projected to continue. International gas trade will probably at least quadruple over the next three decades. This expansion in capability will obviously require huge financial investments. It is likely that the most significant exporter will be Eastern Europe/Northern Asia, and the most significant importers will be Western/Central Europe, and Central/Eastern Asia.





1980 Year




Figure 1. History and average forecast of worldwide annual gas consumption and gas price (USA, at the wellhead).

This assessment of the world gas market in the period 2000-2030 suggests that gas would stay "indefinitely" in demand as long as it is competitively priced. However, it might well take much more than 30 years to develop a mature methane hydrate extraction technology to the degree that hydrate gas production becomes competitive with conventional gas production "at large".

Would the world still need additional unconventional gas resources in, say, 40 years time? How much conventional hydrocarbons would remain and what will be happening to energy demand, alternative fuels / energy sources, fuel cells etc?

There will be special cases and niche markets like Japan or India. These countries deviate from the present global trends of industrial countries in that they have hardly any indigenous sources of hydrocarbons, and pay a premium price for imported gas transported as Liquefied Natural Gas (LNG) or in very long pipelines. Their economic evaluations are obviously entirely different, while also national security related to energy supply becomes an important part of the decision-making process. Hence, these countries have a strong additional incentive to develop methane hydrate off their coasts.

Historically, the trend with most commodities is that continuing technology evolution reduces costs and then makes the resource redundant before it starts to run out. For oil and gas, almost all forecasters have suggested that prices (even in real terms, i.e. corrected for inflation) will rise from the date of the economic forecast. However, when these predictions are considered on a sufficiently long timescale, they have all been incorrect.

Naturally, the further we try and look into the future, the more significant are the uncertainties. It is appropriate, therefore, to shift our focus away from the general gas market to the expected timing of methane hydrate production, and issues affecting that timing.

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