In March, a Japanese oil company announced what basically amounted to a costly failure: It produced natural gas out of ice.

Japan Oil, Gas and Metals National Corp. (JOGMEC) used a sophisticated drillship off the coast of Japan, said Bob Brackett, senior analyst with Bernstein Commodities & Power.

The venture was uneconomical on a ship costing at least $2 million dollars a day, but intriguing given the source of the gas: methane hydrates.

Methane hydrates are formed when water and methane are frozen. Though the ice forms a kind of cage around the natural gas molecules, the water doesn’t bond with the methane but is physically captured. Even in its frozen form, exposure to an open flame can turn a chunk ice into a burning snowball.

Brackett said former Saudi Arabia oil minister, Sheikh Zaki Yamani, once said, “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”

Brackett asks, “Is it possible that the Oil Age will end in fire and ice?”

Brackett noted that the industry once produced gas from sandstone and limestone and conventional reservoirs while shale gas production was viewed as simply uneconomic.

Yet the shale revolution now dominates North America. Could methane hydrates be next? JOGMEC thinks methane hydrates are 10 to 20 years behind shale gas.

But Brackett is unconvinced of any surge in production in the near term.

“There is no obvious threat to any typical investor in oil and gas stocks as a result of methane hydrates,” he said.

Research into methane hydrates began in the United States in 1982 and wells were drilled in the arctic and deepwater in the late 1990s. The allure is in the amount of gas available. Shale gas is expected to last hundreds of years. Methane hydrates supplies are measured in thousands of years, Brackett said.

Methane Hydrate Resources

Resources Available (Tcf)Reservoir Type
100(s)Arctic Sands
1,000-10,000Marine Sands
UnknownFractured muds
100,000sUndeformed muds

Source: Bernstein

JOGMEC used the scientific drillship Chikyu to isolate a sandstone layer of methane hydrates and depressurize it. It drilled a well in about 3,000 feet of water and through 1,000 feet of sediment.

The hydrates flowed during a six-day test with 4 million cubic feet (MMcf) of methane. That’s about 100 barrels of oil equivalent per day (BOE/d).

“Hardly a wildcatter's dream,” Brackett said. “However, such a rate was an order of magnitude larger than previous attempts (mostly onshore).”

The company plans to spend the next year analyzing what happened and begin again.

However, the economics for frozen gas are tough. To be cost effective, drilling costs would need to plummet and recoverable volumes of methane hydrates would need to increase significantly.

“‘Proof’ to us will be in the form of successful long-term production tests,” Brackett said. Still, “time is on the side of innovation, and for the patient the timeline is not impossible.”

Nevertheless countries such as Japan, where liquefied natural gas (LNG) prices are three or four times greater than in the United States, serve as a powerful incentive.

Long term, Brackett said methane hydrates could perhaps become a serious energy source. However, he tends to think they won’t.

“Methane hydrates will require innovation but will be competing with other technologies that are also prone for innovation,” he said. “To single out one, solar energy and battery technologies, but not to exclude biofuels, wind, tidal, variants of nuclear energy.”

Because of the negative views about hydrocarbons on the Earth’s environmental change, Brackett said, “I am led to believe in Yamani's view and if I had to guess, I believe the Oil Age will end in sunshine rather than fire and ice.”