You’d be surprised how many times I was asked this question over the weekend. It started with a few emails that began trickling into my inbox. By the time I was able to respond, the floodgates had opened. Considering that gas hydrates have been making headlines recently, I should have seen it coming.
It’s not often you find me this skeptical over a new source of energy. I would even bet a few of you thought I was headed on another tirade against LNG. I’ve always been clear to my readers about my concerns over liquefied natural gas.
Not much has changed. I still think it is nothing more than a sinkhole for your hard-earned money, but we’ll save that argument for another time.
To be honest, the first thing that comes to mind about gas hydrates has nothing to do with natural gas. Instead, it was the Green River oil shales.
Think about it for a second. . .
Here we have two massive deposits of oil and natural gas that may never be commercially developed.
The problem in both cases is the lack of technology necessary to develop these resources. A best-case scenario would still mean we’re decades away from commercial production. That date is pushed further back when you consider how far oil and natural gas prices plunged since last July.
For the sake of anyone still scratching their heads in confusion, here’s a brief rundown of the situation.
It’s been nearly three years since I last mentioned the possibility of developing methane gas hydrates.
At the time, I had said "The current state of methane hydrate technology appears very disheartening, and production from these hydrates is more suitable in science fiction."
So what exactly are gas hydrates?
According to the USGS, gas hydrates are a crystalline solid consisting of a gas molecule surrounded by a cage of water molecules. These hydrates are found in ocean-floor sediments at depths of more than 500 meters. The gas hydrates are able to form under the cold temperatures and high pressures found on the ocean floor.
In other words, we’re talking about chunks of methane-filled ice that scientists are able to collect.
And even though the amount of methane gas hydrates can’t be pinpointed, the higher estimates suggest there are more than ten times the amount of gas hydrates than currently known reserves for conventional natural gas.
Not too shabby.
And as I mentioned earlier, methane gas hydrates have been making the headlines lately. . .
The Ice that Burns
Last November, a U.S. research team reported that approximately 85.4 trillion cubic feet of natural gas could be potentially recovered from gas hydrates located in Alaska’s Northern Slope. Remember, that’s how much can be developed and produced.
Don’t confuse this number with the 1995 USGS assessment, which came out with a staggering 590 trillion cubic feet of natural gas. The 1995 estimate was an assessment of "all volumes of gas" rather than what could be technically recoverable gas.
To put that in perspective, the world uses approximately 100 trillion cubic feet of natural gas per year, and the U.S. consumes nearly a fifth of that amount—a little over 20 trillion cubic feet of natural gas per year.
Another recent development came from the Gulf of Mexico. Several drillers announced that they had found large deposit of methane gas hydrates on the floor of the Gulf of Mexico.
Of course, there’s a catch when it comes to gas hydrates, and a very specific reason why I can’t too excited over its potential.
Gas Hydrates: Wishful Thinking or Future Production
Right now, developing the world’s deposits of gas hydrates seem like nothing more than a bit of wishful thinking.
For starters, the technology is to commercially produce gas hydrates may be decades away. Personally, I can think of much more profitable plays for natural gas investments.
The emergence of prospective shale basins over the last several years is too difficult to ignore. Now factor in the new advances made in horizontal drilling and hydraulic fracturing techniques. I know these shale plays aren’t new to my readers. More importantly, we’re able to bring that production to market, unlike the methane ice lying at the bottom of the ocean.
It makes sense the U.S. would develop those unconventional onshore fields before extracting gas hydrates off the ocean floor. Also imagine how many more advancements those shale drillers will make by the time we’re technologically proficient enough to commercially recover gas hydrates.
While the development of gas hydrates may be only a matter of time (a long time, in this case), there are simply better opportunities out there available for investors.
Until next time,
Editor’s Note: Let’s be honest with ourselves, do we really want to wait around for decades while scientists try and develop the technology needed to commercially produce gas hydrates? I didn’t think so. But my colleague, Ian Cooper, has been taking advantage of a perfect storm developing in the energy market. I suggest you take a look at these profits for yourself.