Can This Energy Source Change the World?

Flammable ice, or methane hydrate, sounds like an oxymoron. Methane hydrates look like ice, but if you hold a match near them, they burn.  

Methane hydrate is formed when methane and freezing water are fused under enormous pressure. The resource generally exists beneath the ocean floor or in Arctic and Antarctic permafrost. When melted, one cubic meter of methane hydrate yields 164 cubic meters of natural gas.  

This has long fascinated geologists. 

According to the U.S. Geological Survey, the world's total methane hydrate resource may contain more organic carbon than the world's oil, coal, and other forms of natural gas combined. Analysts estimate that there may be anywhere from 10,000 trillion cubic feet to more than 100,000 trillion cubic feet of natural gas in the world's methane hydrate. 

Large potential but not ready for prime time
Many see similarities between methane hydrate now and shale a decade ago.

Like shale ten years ago, many countries are intrigued by methane hydrate's potential but cannot figure out how to economically harness it. Currently the cost to extract natural gas from methane hydrate is estimated to be around $30 to $60 per mmBTU versus the current spot price for natural gas of around $4/mmBTU for United States and $19/mmBTU in Japan.

Like shale now, methane hydrate has the potential of changing the geopolitical map. Countries that currently depend on petroleum imports, such as South Korea and Japan, can benefit greatly and realize better energy autonomy.

Not coincidentally, both countries, in addition to China and the United States, are doing research on how to harness the resource. 

Despite the large amount of intellectual firepower behind methane hydrate research, harnessing methane hydrate economically is still about a decade or two away. Japan estimates that methane hydrate could be economical in a decade or so while China's Ministry of Land and Resources estimates that it could be 10 to 15 years. 

Not everyone is eager to adopt methane hydrate. Environmentalists are concerned about the potential for methane, a potent greenhouse gas, leaking into the atmosphere in the process of extraction. Although methane stays in the atmosphere for a shorter time than carbon dioxide, it is about 20 times more effective at trapping heat than carbon dioxide.  

The environmentalists' concerns, however, are dismissed by some scientists. Ray Boswell, a program manager for the Department of Energy, says the potential for methane leakage in methane hydrate extraction is no higher than methane leakage in the process of drilling for natural gas in shale. 

The bottom line
In addition to governments, some oil companies are also doing research on methane hydrate. ConocoPhillips (NYSE: COP  ) , along with the U.S. Department of Energy and Japan Oil, Gas, & Metal National Corp, ran a successful gas hydrate production trial with CO2 exchange technology in 2012. 

In addition to oil majors that extract the material, oil service companies will likely benefit when methane hydrate becomes economical.

Because of the enormous upstream investments likely required to extract natural gas from methane hydrate, leading oil service companies such as Schlumberger (NYSE: SLB  ) and drill bit maker Baker Hughes (NYSE: BHI  ) will likely realize greater revenues. Those oil service companies have benefited greatly from the shale revolution and will likely benefit from methane hydrate extraction as well.

Due to the resource's large potential, many countries and some oil companies are currently working on ways to harness methane hydrate economically and will benefit greatly when that event occurs.

Another company with the power to change the energy landscape
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

 


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 20, 2014, at 2:09 PM, JohnMaria wrote:

    Can the frozen hydrocarbon be harvested as a solid? It would seem, transporting a cubic meter of a solid would be more beneficial than 150 cubic meters of gas.

  • Report this Comment On January 20, 2014, at 11:11 PM, speculawyer wrote:

    No, it is not time. No one has figured out how to harvest them in a cost-effective manner.

  • Report this Comment On January 21, 2014, at 5:20 PM, dogjudge wrote:

    JohnMaria,

    A different perspective for you. I work in the food ingredient industry.

    When you ship food ingredients, you want them to be as concentrated as possible. The last thing that you want to be shipping from coast to coast is water, or salt.

    That's why companies such as Coke and Pepsi ship concentrate to their bottlers instead of shipping them the finished syrup.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2796449, ~/Articles/ArticleHandler.aspx, 12/21/2014 8:02:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement