Methane hydrate development and cost-effectiveness

Image of methane hydrate development

Although methane hydrate development has not reached the commercial development stage yet, a realistic image of the development stage is becoming clearer because MH21 is acquiring knowledge about occurrences in methane hydrate layers, and also about the production method, which was the pending issue.

In summary:
The methane hydrate layers targeted for development are “methane hydrate concentrated zones” consisting of “pore filling type methane hydrate layers in sandy sediments.”
The production method that has been used is called the “depressurization method-based approach.”

It has become clear that the existing systems are applicable, as they are or with small modifications, to the production facilities and equipment (development systems).

The fact that the existing systems are capable of supporting methane hydrate development systems means that the production of methane hydrate is able to be carried out almost in the same way as oil and natural gas development once methane hydrate is dissociated in the layers.

Despite the above, however, the development of methane hydrate differs from the development of oil and natural gas in many aspects. The following lists shows the major differences.

  1. Oil and natural gas simply flow out when a well is drilled, on the other hand, methane hydrate requires an extra step of dissociating in the layers, and this mechanism must be included in the development system.
  2. Oil and natural gas exists in the deep portion 2,000 to 4,000 m beneath the ground or sea level. On the other hand, methane hydrate is at superficial portion of up to approximately 500 m below the seafloor.
  3. Therefore, oil and natural gas exist in many cases in already consolidated layers, but many of the methane hydrate layers exist in unconsolidated layers. Unconsolidated layers can induce productivity reduction unique to these layers.
  4. When the depressurization method is employed for production purposes, the daily production volume of methane gas will be one digit smaller than that of natural gas (100,000 m³ on an average) (even when the simple depressurization method is employed, the current estimated production volume is around 50,000 m³).
  5. Since the dissociation of methane hydrate is an endothermic reaction, continued production reduces the temperature of surrounding layers, leading to a decline in production volume.

Evaluation of cost-effectiveness

The objective of “Japan’s Methane Hydrate R&D Program” is to “establish the methane hydrate development technologies and transfer them to private oil entities.”

Since private entities engage in methane hydrate development, considerations to cost-effectiveness are indispensable. In other words, “Can we make a profit or not?” is the issue.

Now, the methane hydrate layers targeted for development have been selected, the production method has almost been decided upon, and the form of future development has become clearer. However, too many assumptions still exist for us to be able to make an accurate evaluation of cost-effectiveness.

Despite the above, if the cost-effectiveness of the given development is totally infeasible, it is not be able to be promoted as a national project. Therefore at the last stage of Phase 1, MH21 evaluated cost-effectiveness based on the current assumptions.
The following shows the flow of the evaluation of cost-effectiveness conducted at the last stage of Phase 1.

  1. A concentrated zone named Alpha-1 was set as the model methane hydrate concentrated zone.
  2. The geological environment of Alpha-1 concentrated zone and methane hydrate bearing environment were estimated from existing data (evaluation of reservoir).
  3. Date on the estimated methane hydrate bearing environment was input to the unique-to-Japan production simulator MH21-HYDRES to execute the production simulation based on the scope of development and time scale available from the assumed production method.
  4. Various conditions were input to “MH-ECONOMICS BM,” a cost-effectiveness evaluation program for methane hydrate being developed uniquely in Japan, to select the most cost-effective development scenario among various scenarios simulated by the program.

The following figure shows the result of the evaluation conducted on the most cost-effective plan available when a simulation targeted at Alpha-1 concentrated zone was carried out.

Result of the evaluation of cost-effectivenessResult of the evaluation of cost-effectiveness

The following shows the result of a calculation performed on the production costs.

Production costs in methane hydrate development (estimation at present time)Production costs in methane hydrate development (estimation at present time)

Tasks in Phase 2

There was another reason why an evaluation of the cost-effectiveness was conducted. It was to carry out a sensitivity analysis relevant to the cost-effectiveness.
The sensitivity analysis of cost-effectiveness aims to determine “How economic efficiency can be enhanced by improving which technologies and parameters?”

MH21 has investigated how cost-effectiveness will be smoothly enhanced by varying the parameters entered into MH-ECONOMICS BM – a cost-effectiveness calculation program – one by one.
As a result, the following improved parameters were found important to enhance cost-effectiveness.

  1. Increase in gas production rate
  2. Improvement in recovery factors
  3. Reduction in water production rate
  4. Reduction in sand production rate
  5. Reduction in subsea system costs