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VI. Study of MH Production System and Evaluation of Economics and EROI
VI. 1. Basic Plans and Issues of MH Production System(1) Objective
The aim of this study was to show a full picture of the MH production system that consists of wells,
subsea systems, flowlines and riser/umbilical systems, offshore gas processing facilities, andtransportation facilities to provide processed gas to onshore customers, in order to extract
necessary technical elements, estimate costs, and evaluate environmental impacts.
In the R&D program Phase 2, we gathered basic information about gas production systems
through various case studies with reference to development of conventional oil and gas fields indeep water.
In the R&D program Phase 3, we selected several candidate production systems based on thestudies conducted in Phase 2, and then analyzed the requirements for commercialization andissues currently recognized for each selected system in order to identify the basic plan ofproduction systems that could be used for future commercial production.
(2) Configuration of MH Production System
The MH production system is the entire system that is necessary to produce gas from MH
reservoirs, process the produced gas, and deliver it to the customers. It consists of subsystems of
production, processing and transportation.
The production system, which primarily corresponds to wells and subsea systems, is for extracting
gas from MH reservoirs. The processing system, which corresponds to offshore platforms, etc., isfor removing water and impurities from produced gas. In some cases, this system also includes
facilities for converting gas into electricity. The transportation system, which corresponds to LNG(Liquefied Natural Gas) vessels, subsea pipelines and subsea cables, is for delivering processed gas
or electricity to customers.
(3) Details and Results
The components (production, processing and transportation) of the MH production system needto conform to the conditions related to MH concentrated zone itself such as the conditions ofreservoir, location, weather and sea, seabed and so on. Also, the sales methods may become aconstraint condition for the system components. Therefore, we considered the feasibility in termsof the condition of sales methods (business model) and initially extracted the candidates of MH
production system. Table 1 shows the comparison of business models and the extraction results of
the MH production system candidates.
Next, we narrowed down the candidates to the following three options for further study fromtechnical, economic and social viewpoints. Table 2 shows the feasibility, advantages and tasks /MH21 Research Consortium

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issues of the three options. Although all the three options have tasks / issues, they also haveadvantages and could be feasible depending on future conditions. Accordingly, all the three
options detailed below remain subject to further study.
・Option 1： Offshore Platform System (Fig. 1)
・Option 2： FLNG (Floating Liquefied Natural Gas) System (Fig. 2)
・Option 3： SSL (Sub-sea to Land) System (Fig. 3)① Subsea Pipeline Model (Options 1 & 3).
This model needs large-scale investment including compensation for fishery rights holders to lay
subsea pipelines, therefore it is important to investigate whether there is sufficient gas demandcommensurate with such investment in the area around the onshore delivery point for each MH
concentrated zone. This system is considered to have relatively few issues, and if we overcome
such technical issues and realize stable operation and supply, it could become a major businessmodel for commercial production. Two schemes, offshore platform system (Fig. 1) and SSL
system (Fig. 3), were set as Option 1 and Option 3 of the MH production system candidates,
respectively.
② FLNG Model (Option 2).
FLNG operation has already started in some conventional gas fields, however, overall experience isstill poor in both numbers and operating time. In addition, the sea conditions around the
FLNG-applied fields are relatively calm, therefore it is considered that there still remains technicaluncertainties in terms of the applicability to the ocean around Japan where weather andoceanographic conditions are severe. Although this business model has technological challenges, it
has the highest affinity with existing LNG business chains. Therefore, FLNG System (Fig. 2) was
set as Option 2 of the MH production system candidates.
As it is difficult to identify significant advantages of the options other than Options 1-3, and whileconsiderable technical issues and uncertainties about the market are recognized, we removed themfrom the candidates in this study. However, we should keep those options in mind because
technical innovations or new findings relating to them may drastically change the situation.
As the options except for Option 1-3 are difficult to find significant advantages while considerable
technical issues and uncertainties about market are recognized, we removed them from thecandidates in this study. However, we should keep those options in mind because technicalinnovations or new findings relating to them might drastically change the situation.

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Fig.1 Overview Picture of Offshore Platform System

Fig.2 Overview Picture of FLNG (Floating Liquefied Natural Gas) System

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Fig.3 Overview Picture of SSL (Sub-sea to Land) System

Table 1Comparison of Business Models and Extraction Results of MH Production System Candidates

No. Sales Method

System Candidate (Gas
Processing / Transportation)

Point on Feasibility

1・ Transport gas to land by ・With stable operation and supply, it may be a ・ Offshore Platform System/Subsea
subsea pipelines.
major business model.
pipelines
・Existing technology can be utilized.
・Subsea Station/Subsea pipelines

2・Sell gas as LNG liquefied ・Despite technological challenges, it has high ・FLNG vessels/LNG vessels
offshore to land or abroad.
affinity with existing LNG business chain.

3・ Sellgasas
CNG ・The market is small.
(Compressed Natural Gas)
produced offshore to land or
abroad.

4・Transmit electricity generated ・With stable operation, it may be a major ・Not a candidate.
offshore to land by subsea business model.
power cable.

5・Transport chemical products ・Remain opaque.
made offshore to land by
subsea pipelines.

MH21 Research Consortium・Not a candidate.

・Not a candidate

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Table 2Comparison Table of Selected MH Production System Options

Gas
Production
Feasibility
Advantages
SystemOffshore・As most of the equipment can ・ Few new
Platform System be used by improving existing elements(Option 1)
equipment, technical difficulty
is relatively low.
FLNG System(Option 2)・Same as above.

SSL System(Option 3)・Same as above.

Tasks / Issues

development ・Necessary to match the platform design tosevere weather and oceanographic conditionsin Japan.
・Pipelines may interfere with existing subsea
infrastructure such as cables.
・No interference with subsea ・There are few achievements.
infrastructure such as cables. ・ There are unknown factors such as・Suitable for Japan’s natural operations under severe weather andgas infrastructure.
oceanographic conditions.
・FLNG construction cost is higher than that ofa normal platform.
・ Few new development ・Depending on the distance, an expensive andelements.
massive subsea compressor is needed.
・Platform is not needed, so ・ Pipelines may interfere with subsea
hardly affected by weather infrastructure such as cables
or oceanographic conditions. ・Difficult to deal with emergency.
・Cost is high in the case of ESP installment
for each well.

(4) Conclusion
Several candidates for the MH production system were investigated and compared in terms offeasibility, and consequently three promising options were selected. Regarding identifying theoptions, we conducted a technical survey and economic evaluation.
Each option has advantages and disadvantages, in addition, there is high uncertainty about thetechnical subjects and the business environment such as future gas demand at this point in time.
Therefore, it is premature to decide which option is the best.
In order to make such a production system more realistic and the optimum one in the future, itwould be necessary to reflect the prediction of production behavior based on the results of theoffshore production tests and take into account the more acceptable conditions from the viewpointof customers. In addition, it is necessary to review the MH production systems repeatedly in viewof the progress of research and acquisition of new data/information.

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Ⅵ.2 Evaluation of the Economics and EROI

(1) Objective
The economic efficiency and Energy Return on Investment (EROI) should be sufficiently high in order formethane hydrate (MH) to be established as a commercial resource, however, it is difficult to elaborately
discuss them because of the high level of uncertainty regarding technical matters and the future businessenvironment.
However, in order to proceed with the MH research and development flexibly and reasonably adjusting theroadmap to focus on future commercial production, responding to the progress in relevant technology andthe changes in the outlook of the external environment, it is necessary to evaluate the economics and EROI,
based on the currently assumed production system and gas production behavior.
This chapter describes the necessary conditions of the MH concentrated zone for future commercial
production and the calculation result of EROI, which were studied on the basis of the latest findings andassumptions gained through the MH offshore production tests.

(2) BackgroundWe announced the economic efficiency of the production system as the result of the R&D program Phase 1
in FY2008. Since then, we have investigated production systems such as offshore platforms, subsea
production/separation systems, and subsea pipelines, which would be applied to future production systems,
and accumulated cost data for these systems.
The first MH offshore production test was performed in the R&D program Phase 2. We obtained the actual
data on the production behavior through the test, even though it lasted for just six days.
On the other hand, as medium- and long-term attempts to realize MH commercial production, the basic
studies of the production systems that could be applied to commercial production under Japan’s oceans
were carried out in parallel with the actual production tests.

(3) Details and Results① Economic Evaluation
A. Estimation of Long-Term Production Behavior
In order to estimate long-term production behavior by reservoir simulation, it is necessary to understand theparameters that show the properties of MH layers, such as net gross ratio, porosity, MH saturation,
permeability, etc.
We set up these parameters based on the core and logging data so that the production behavior of theoffshore production test could be reproduced.
We used the “MH21-HYDRES” reservoir simulator jointly developed by the University of Tokyo, JapanOil Engineering Co., Ltd. and AIST under MH21, to help predict production behavior.
Fig.1 shows an example of the predicted production profile.
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10000

Gas rate

1350

9000

Water rate

18000

640000

Cumulative gas

1200

8000

Cumulative water

16000

1050

480000900

400000750

320000600

240000450160000

300

80000

150

0

7000

14000

6000

12000

5000

10000

4000

8000

3000

6000

2000

4000

1000

2000

0

0
0

1

2

3

4

5

6

7

20000

8

0
0

Time(Year)

Cumulative water production (103m3)

560000

Water production rate (m3/day)

1500

720000

Cumulative gas production (106Sm3)

Gas production rate (Sm3/day)

800000

1

2

3

4

5

6

7

8

Time(Year)

Fig.1 Predicted production profile of the assumed largest MH concentrated zone (For one well)(Left) Gas production rate, (Right) Water production rate

B. Conditions/Assumptions for Economic Evaluation
As the gas production period of the second MH offshore production test was approximately one month, thelong-term gas production behavior is still uncertain, which means there remains various levels of
uncertainties such as the number of production wells and the capacity of production facilities for futurecommercial production. Therefore, for economic evaluation, it is necessary to make a range of assumptions
to supplement such uncertain parameters.
Table 1 shows the conditions/assumptions for economic evaluation, and Fig. 2 shows the schematic view ofthe MH production system.

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Items
MH concent-rated zone
Reservoir
Production
methods(including
production
simulation)

Gas Sales
methodGas
Production
system(Fig. 2)

Table 1 Conditions/Assumptions for Economical Evaluation
Conditions/Assumptions
・Base models were created based upon the characteristics of expected MH
concentrated zones
・Assumed on the basis of the existing well data and sedimentological studies(It is assumed that it is uniformly continuous in the horizontal direction
throughout MH concentrated zone）
・Depressurization method with a bottomhole pressure of 3 MPa
・One production well covers an area of approximately 600 sq m (equivalent to agas drainage area of 350 m radius)・Assumed no exchange of heat or fluid between the inside and outside areas
・Do not consider any impact on productivity caused by sand flow andaccompanying issues, or deformation of sand layers caused by MH dissociation.
・Gas is transported via a subsea pipeline to the shore near the MH concentrated
zone and sold to a utility company.
・No odorization or calorific value adjustments
・Gas is boosted and sold at 5.6 MPa. (for power plants)
・Gas sales price is assumed according to its calorific value.
・Multiple wells are connected to a manifold, and produced gas and water arecollected.
・A subsea separator is placed after the manifold. Gas is collected at the platform,pressurized and dehydrated, and pumped to the shore via a subsea pipeline.
・Produced water is reinjected into the layer below the MH reservoir after being
separated on the seabed.
・Assumed electrical submersible pumps for depressurization are placed after
separators, not installed in each wellbore.

Floating Platform

Riser
Subsea Pipeline
Manifold

Separator

Manifold

Gas

ESP

Rate

for

Platform Total

Gas Rate per
Cluster

Wells
MH Reservoir
Fig.2 Schematic view of gas production system

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C. Prediction of LNG Price
Assuming a scenario in which commercial production is realized in the 2030s as stated in the Basic Plan on
Ocean Policy formulated by the Japanese government, the gas production cost must be competitive against
the LNG price at that time.
It is assumed that the LNG price in Japan within the period 2030－2050 will be $10－11/MMBtu based on
outlooks of the IEA and EIA. However, the LNG price should be assumed to be within a certain range dueto the difficulty of predicting the supply and demand around the world. While using $10/MMBtu as a guide,
we considered the highest actual price of $18/MMBtu as an upper limit. In addition, as the LNG price must
include profit for the developers, we set a criterion of an IRR (Internal Rate of Return) of 10% on this trial
calculation.

D. MH Concentrated Zone Conditions for Commercial Production
In the implementation plan of "MH R&D Program of Phase 3," the following are described as criteria forcommercial production.
・The duration of gas production from each well can be expected to last for several years.
・Gas production rate from each well can be expected to exceed several tens of thousands m3/day and more.
We roughly calculated the conditions to satisfy the requirement of IRR of 10% based on an LNG price of$10/MMBtu. From the calculation results, the initial MH in-place volume in a concentrated zone and theaverage production rate per well were indicated as follows.
(The MH recovery factor is not known at present, so it should be considered to be with a certain range.)
・Initial MH in-place volume should be approximately 50 billion m3 or more・The average production rate per well is about 150,000 m3/day and more. (Expected well life: eight
years)
Similarly, in the case of the LNG price of $18/MMBtu, the results are as follows:・Initial in-place MH volume should be approximately 10 billion m3 or more.
・The average production rate per well is about 50,000 m3/day and more. (Expected well life: eight
years)

Table 2 shows the MH concentrated zone conditions required for commercial production.

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Table 2 MH Concentrated Zone Conditions Required for Commercial Production
Criterion (the LNG Price $10/MMBtu)

Large

MediumSmall

More than 50 billion m3(2 TCF)10 - 50 billion m3(0.4 - 2.0 TCF)

Less than 10 billion m3(0.4TCF)◎〇MH in-place
Gas production rate
(8 years average)

High
More than
150,000 m3/day

×(Not Applicable)(Priority：High)

Medium50,000-150,000 m3/day(LNG $18/MMBtu)(Priority：Medium)

Bench Mark

〇

△

×

(Priority：Low)(Not Applicable)(Priority：Medium)

Small
Less than
50,000 m3/day

×

×

×

(Not Applicable)(Not Applicable)(Not Applicable)

Although the existence of several MH concentrated zones has been confirmed by drilling and/or
well logging in the Eastern Nankai Trough, such areas where the existence of MH has been
directly confirmed are extremely limited. However, the existence of MH concentrated zones has
been indicated by the integrated interpretation based on seismic data even in areas other than the
Eastern Nankai Trough, and we evaluate that some of the indicated MH concentrated zones could
be commercially developed when the LNG price is $10/MMBtu (Table 2), although theevaluations are based on various assumptions that contain many uncertainties at the moment.
These assumptions should be verified and the evaluation should be continuously reviewed alongwith demonstrating the necessary technologies.
② Calculation of Energy Return on Investment (EROI)
A. Calculation method
Fig. 3 shows the concept of the EROI calculation method. Among the factors required for the
calculation, the input energy is estimated from the total amount of energy of each activity at
the various stages in the life cycle. Therefore, it is important to set the evaluation scope andorganize the corresponding unit energy consumption in preparation for the calculation.

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Input Energy※ External Supply

Production

Recovered Energy

Recovered Energy
EROI

Reservoir

Input Energy

Fig.3 The concept of EROI calculation method
B. Evaluation Scope
There are roughly two approaches to evaluate EROI. One is to cover all energy consumption
including energy consumed for manufacturing the facilities used for drilling, liquefaction,transportation, and other activities. The other is to cover only energy consumption for theoperation of each facility. Nowadays, the latter approach is common as the energy
consumption during the operation is much larger than the facility manufacturing energy inany system.
However, when considering the MH production system for the ocean around Japan, it isnecessary to drill a large number of wells (though the drilling depth is shallow) and install
many subsea facilities in comparison with conventional oil and gas development, therefore
the former approach, which covers all the energy consumption including the consumed
energy for manufacturing, was selected for this evaluation. On the other hand, we excluded
the conversion to secondary energy such as electricity and city gas from the evaluation scope,
because there is no difference between existing energy and MH in the conversion process.
Fig. 4 shows the concept of EROI evaluation range.

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Manufacture of production & supply system・Recycle・Disposal

Prospect

Production

Liquefaction

RefineTransport

2ry Energy
Conversion※for Product※for LNG

Energy Supply Cycle (e.g. Until MH gas storage tank of utility company)
Fig. 4 Concept of EROI evaluation scope
C. Evaluation of EROI
Fig. 5 shows the calculated results of EROI and the past results evaluated for conventional fossil fuels.
For offshore platforms and Sub Sea to Land (SSL) systems, the EROI was estimated at around 10 ~ 16.
These values are inferior to those of imported coal and crude oil but almost the same as those for heavy oil.
EROI for the FLNG system was approximately 5, which is slightly lower than the value for LNG, which is
6. As mentioned above in the economic evaluation section, the calculation is still subject to many
uncertainties at present and we believe it is too early to conclude which option would be ideal or whether
MH development would be inferior or not compared with existing energy based on those calculated values.
However, it would be reasonable to continue R&D into MH while focusing on future commercial
production from the viewpoint of effective utilization of domestic energy.
This trial calculation was carried out by Mizuho Information & Research Institute Inc. through Japan
Methane Hydrate Operating Co., Ltd. (JMH) which we consigned for this study.

Fig. 5 the Calculated result of EROI 2) 3) 4)

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Comprehensive Report of Phase 2 & 3 Research Results③ Enhancement Recovery Methods of MH
The depressurization method, which depends only on pressure reduction, is the best method in terms of the
EROI, but the dissociation ability of MH is not so high. Accordingly, it may be necessary to apply any
production enhancement mechanism such as additional heat supply together with depressurization.
Therefore, we investigated the proposed production enhancement methods through literature surveys andinterviews. These methods have not yet reached the field verification stage, and we should continue tomonitor their development. They are summarized below.
A. Dual Horizontal Wells
This is a similar method to SAGD (Steam-Assisted Gravity Drainage) used for oil sands production in
Canada. Two horizontal wells (the lower well is used as an injection well, and the upper is used as a
production well) are drilled into the MH layer. Hot water or CO2 is injected from the injection well anddissociated gas is recovered from the upper well.
B. Combined Geothermal Application
Geothermal hot water (40-50℃) is collected directly from the deep stratum and circulated into the sandlayer just below the BSR (Bottom Simulating Reflector). Heat is supplied to the MH layer to induce MH
dissociation and improve gas productivity.
C. Geothermal Application
This method involves injecting hot water warmed by deep geothermal activity into an MH layer where thepermeability has been increased to some extent as a result of gas production by the depressurization
method.
D. Injection of Different Type Gases
This method makes MH dissociation accelerate by injecting different types of gases such as CO2 and N2
into the MH layer.
E. Deep Depressurization
This method aims to facilitate the MH dissociation with ice formation heat by reducing the bottomholepressure below the original target of 3 MPa to intentionally generate ice.
F. CO2/Water Emulsion Injection
When CO2/water emulsion is injected into the MH layer, CO2 hydrate is generated. This method uses theformation heat of CO2 hydrate to dissociate MH.
G. Hydraulic Fracturing
This method aims to improve the initial permeability of MH layers via the hydraulic fracturing method,which is widely used for shale gas development.

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H. Ultrasonic Irradiation
Ultrasonic irradiation is considered to improve the MH dissociation rate and contribute to MH gas
production.

(4) Conclusion
We carried out economic evaluation and EROI calculations based on the results of R&D program Phases 2& 3. In addition, we also examined the proposed production enhancement methods of MH.
The following are summaries of these studies.

① Economic evaluation
As a result of evaluating the economic efficiency, it became clear that the economic efficiency is greatly
affected by the gas production rate per well. In other words, the key to reach commercial MH development
should be to find methods to attain higher gas production rate and total gas recovery per well.
The evaluation results suggested that there may be a possibility of commercial production depending on theconditions of MH concentrated zones, economic conditions, and the actual production behavior, etc.
However, as we have not yet fully grasped the actual gas production behavior, it is difficult for a private
enterprise to make a decision to take the initiative in the MH business based on this trial calculation that
contains a range of uncertainties at present. It will be critical to gain further understanding of gas
production behavior from MH layers in order to help eliminate such uncertainties.

② Trial Calculation of EROIWe tried to calculate EROI using assumed gas production rates over a wide range. The EROI of MH wasestimated at around 10 ~ 16, which is almost equivalent to that of heavy oil. Since many uncertainties arestill contained in the latest calculations, and because it is too early to conclude whether or not MH
development would be inferior compared to development of existing energy sources, it would bereasonable to continue R&D into MH with a focus on future commercial production from the viewpoint ofeffective utilization of domestic energy.

③ Enhancement Methods of MH Dissociation
As productivity improvement should be inevitable when aiming for the commercial stage, we investigatedthe proposed production enhancement methods of MH. However, these methods have not yet reached thefield verification stage, and we should continue to monitor their future development.
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Citations and References[1] Harukuni Kameda, Tatsuo Saeki, 2017: On issues concerning economy, Methane Hydrate Forum 2017[2] The Institute of Applied Energy (IAE), 1994: Study of the methods for the comprehensive fossil fuelcycle analysis viewed from global environment.
[3] Central Research Institute of Electric Power Industry (CRIEPI) Research Report, 1991: Energy
Analysis of Power Plants.
[4] Toyota Motor Corp, Mizuho Information & Research Institute, 2004: Well-to-Wheel Evaluation ofTransportation Fuel

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