Ice Gas: A Step Closer to Commercial Production

The news in early March that a Japanese company had finally successfully extracted natural gas from methane hydrate deposits under the seabed offshore Japan was hailed as a breakthrough for the energy industry around the world. There are large deposits of methane hydrate, or "ice gas", in several locations around the planet which means, if successfully exploited, they could bring to many regions around the world the low gas prices currently seen in North America as a result of the shale gas boom.

Japan Oil, Gas and Metals National Corporation (JOGMEC) reported March 12 that it successfully extracted natural gas from methane hydrate deposits from around 1,000 feet under the seabed offshore Japan.

Methane hydrate is a compound in which a large amount of methane is trapped within a crystal structure made up of water, so forming a solid that is similar to ice in its composition (although it looks like slush). For methane hydrate deposits to form the right conditions in terms of pressures and temperatures are required. These conditions are normally found in four kinds of environment:

Sediment and sedimentary rock under Arctic permafrostSedimentary deposits along continental marginsDeepwater sediments of seas and lakes (e.g. the fresh water Lake Baijal, Siberia)Beneath Antarctic ice

There are some 40 trillion cubic feet of methane held in methane hydrate deposits under the sea in the eastern Nankai Trough, off the southern coast of the Japanese island of Honshu, according to JOGMEC. This is equivalent to around 11 years of the amount of liquefied natural gas that is currently imported into Japan.

JOGMEC has been working at the Daini Atsumi Knoll, off the coasts of the Atsumi and Shima Peninsula since February 2012. After acquiring pressurized core samples last summer, the company began an experimental flow test in March this year, successfully yielding gas from the methane hydrate deposits.

In order to achieve extraction, JOGMEC used specialized equipment to drill into and depressurize the methane hydrate causing the gas to separate. The gas was then piped to the surface.

JOGMEC hopes its experimental test will help it better understand dissociation behavior of methane hydrate under the seabed and the impact to the surrounding environment. A second offshore test is planned ahead of commercial production that could be achieved later this decade. However, a lot will depend upon whether the costs of extraction can be brought down to low enough levels to make commercial production viable.

While the Japanese government says that it is now planning a three-year study into how much ice gas it has within its territorial waters in the Japan Sea, a number of other countries have also been looking to exploit methane hydrate resources.

For example, last August, the U.S. Department of Energy (DOE) announced funding for 13 research projects across 11 U.S. states to help develop methane hydrate deposits as an energy source. At the time, U.S. Energy Secretary Dr. Steven Chu commented that although research on methane hydrates is still at an early stage, these research efforts could one day yield the same kind of benefits achieved by the shale gas boom after the country invested in researching shale gas in the 1970s and 80s.

Meanwhile, China is also investing millions of dollars into the study of methane hydrates.

The energy content of methane occurring in hydrate form is immense and could exceed the combined energy content of all other known fossil fuels (one cubic foot of methane hydrate contains approximately 160 cubic feet of natural gas), according to the U.S. DOE. But there is still the question of how big future production volumes could be. This is what the current project by JOGMEC should go some way towards determining, as will certain projects that the DOE is funding.

One of the projects that the DOE is helping to fund is being carried out Georgia Tech Research Corporation. This organization was granted $626,000 for a project that aims to understand the behavior of gas hydrates hosted in fine-grained sediments such as clay or silt, including how to evaluate extraction methods that could be used to produce gas from such sediments.

The U.S. government's strong research interest in methane hydrates is not surprising given that the U.S. Geological Survey (USGS) has identified several accumulations of methane hydrates offshore United States and Central America. Meanwhile, in the North Slope of Alaska the USGS estimates a mean resource of some 85 trillion cubic feet of natural gas held within methane hydrate deposits.

As well as offshore Japan and the Russian Far East, accumulations of methane hydrates have also been discovered in the Black Sea and off the coast of West Africa. But there are plenty of other locations around the world where methane hydrates are thought likely to occur.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Ice Gas: A Step Closer to Commercial Production

The news in early March that a Japanese company had finally successfully extracted natural gas from methane hydrate deposits under the seabed offshore Japan was hailed as a breakthrough for the energy industry around the world. There are large deposits of methane hydrate, or "ice gas", in several locations around the planet which means, if successfully exploited, they could bring to many regions around the world the low gas prices currently seen in North America as a result of the shale gas boom.

Japan Oil, Gas and Metals National Corporation (JOGMEC) reported March 12 that it successfully extracted natural gas from methane hydrate deposits from around 1,000 feet under the seabed offshore Japan.

Methane hydrate is a compound in which a large amount of methane is trapped within a crystal structure made up of water, so forming a solid that is similar to ice in its composition (although it looks like slush). For methane hydrate deposits to form the right conditions in terms of pressures and temperatures are required. These conditions are normally found in four kinds of environment:

Sediment and sedimentary rock under Arctic permafrostSedimentary deposits along continental marginsDeepwater sediments of seas and lakes (e.g. the fresh water Lake Baijal, Siberia)Beneath Antarctic ice

There are some 40 trillion cubic feet of methane held in methane hydrate deposits under the sea in the eastern Nankai Trough, off the southern coast of the Japanese island of Honshu, according to JOGMEC. This is equivalent to around 11 years of the amount of liquefied natural gas that is currently imported into Japan.

JOGMEC has been working at the Daini Atsumi Knoll, off the coasts of the Atsumi and Shima Peninsula since February 2012. After acquiring pressurized core samples last summer, the company began an experimental flow test in March this year, successfully yielding gas from the methane hydrate deposits.

In order to achieve extraction, JOGMEC used specialized equipment to drill into and depressurize the methane hydrate causing the gas to separate. The gas was then piped to the surface.

JOGMEC hopes its experimental test will help it better understand dissociation behavior of methane hydrate under the seabed and the impact to the surrounding environment. A second offshore test is planned ahead of commercial production that could be achieved later this decade. However, a lot will depend upon whether the costs of extraction can be brought down to low enough levels to make commercial production viable.

While the Japanese government says that it is now planning a three-year study into how much ice gas it has within its territorial waters in the Japan Sea, a number of other countries have also been looking to exploit methane hydrate resources.

For example, last August, the U.S. Department of Energy (DOE) announced funding for 13 research projects across 11 U.S. states to help develop methane hydrate deposits as an energy source. At the time, U.S. Energy Secretary Dr. Steven Chu commented that although research on methane hydrates is still at an early stage, these research efforts could one day yield the same kind of benefits achieved by the shale gas boom after the country invested in researching shale gas in the 1970s and 80s.

Meanwhile, China is also investing millions of dollars into the study of methane hydrates.

The energy content of methane occurring in hydrate form is immense and could exceed the combined energy content of all other known fossil fuels (one cubic foot of methane hydrate contains approximately 160 cubic feet of natural gas), according to the U.S. DOE. But there is still the question of how big future production volumes could be. This is what the current project by JOGMEC should go some way towards determining, as will certain projects that the DOE is funding.

One of the projects that the DOE is helping to fund is being carried out Georgia Tech Research Corporation. This organization was granted $626,000 for a project that aims to understand the behavior of gas hydrates hosted in fine-grained sediments such as clay or silt, including how to evaluate extraction methods that could be used to produce gas from such sediments.

The U.S. government's strong research interest in methane hydrates is not surprising given that the U.S. Geological Survey (USGS) has identified several accumulations of methane hydrates offshore United States and Central America. Meanwhile, in the North Slope of Alaska the USGS estimates a mean resource of some 85 trillion cubic feet of natural gas held within methane hydrate deposits.

As well as offshore Japan and the Russian Far East, accumulations of methane hydrates have also been discovered in the Black Sea and off the coast of West Africa. But there are plenty of other locations around the world where methane hydrates are thought likely to occur.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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BP: Commercial Flow Rates at Itaipu-1, Offshore Brazil

LONDON - BP PLC Monday said it has completed a flow test at its Itaipu-1A well offshore Brazil, one of the world's most promising oil and gas frontiers, that indicates commercially viable flow rates from the pre-salt reservoir.

BP said the test achieved flow rates of up to 5,600 barrels of oil a day for 32 hours from the well, which is located in the deep-water sector of the Campos Basin, 125 kilometers offshore Brazil.

"This is a good result for the Itaipu project, indicating that commercially viable flow rates can be achieved from this pre-salt carbonate reservoir," said BP vice president for exploration Brazil Neil Piggott.

Geologists believe the oil and gas exploration areas off Brazil's northeastern coast may hold similar reserves to those found in west Africa. Bountiful hydrocarbon discoveries in the last decade have led to a near 70% rise in the South American country's proven oil and gas reserves. Much of that success has been achieved by tapping reservoirs contained beneath an ultra-deep layer of salt that lies thousands of meters below the seabed.

The Itaipu-1A pre-salt well was drilled in 2009 by Devon. BP purchased Devon's interests in Brazil in 2011.

The Itaipu-2 appraisal well was drilled in 2011. A second appraisal well location, Itaipu-3, has been agreed with the Brazilian National Petroleum Agency, and will be the next operation at the Itaipu field later this year.

BP is the operator of the block with 40% equity. Anadarko Petroleum Corp. (APC) holds a 33.3% stake in the block and Maersk Energia Ltda. has a 26.7% share.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Brazil's OGX Declares Three Offshore Oil Fields Commercial

RIO DE JANEIRO - Brazilian independent oil producer OGX Petroleo e Gas Participacoes SA, part of billionaire businessman Eike Batista's industrial empire, said late Wednesday that it had declared three offshore oil fields commercially viable for development.

The commercial declarations mean that OGX will move forward with development of the fields, which could add a much-needed boost to the company's crude-oil production after disappointing results at the Tubarao Azul field. Investors have punished OGX's shares recently amid concerns that the company will be unable to generate sufficient returns.

OGX said two fields in the previously named Pipeline accumulation will be renamed Tubarao Tigre and Tubarao Gato, while the Fuji-Illimani discover will be renamed Tubarao Areia. Evaluation plans were also submitted to local regulators to further explore the Tulum, Viedma and Vesuvio discoveries in the Campos Basin and the Curitiba Belem and Natal discoveries in the Santos Basin.

The submissions were required after exploration periods for OGX's concessions expired on Tuesday.

While commercial declarations are generally seen as positive developments for oil companies in Brazil, OGX's decision to report "in place" oil volumes for the three fields of between 521 million barrels of oil equivalent, or BOE, and 1.34 billion BOE is raising questions.

In-place oil volumes aren't the same as recoverable volumes, or the amount of oil that a company can be expected to recover from a reservoir, noted Credit Suisse in a research report. "We ask ourselves why announce 'in situ' ['in place'] when industry practice is to announce recoverable volumes, something which OGX itself did for its other two fields," Credit Suisse said.

OGX didn't provide the market with the "certainty" about the company that it needs, Credit Suisse said. A month-on-month decline in crude oil output in February caused market analysts to issue a series of downgrades on the company's shares this week, many of them equivalent to a sell rating with price targets at about $1.

Copyright (c) 2012 Dow Jones & Company, Inc.

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