SS Gas Hydrate: Model Calculation on Economics of Depressurization-Induced Gas Production from Oceanic Methane Hydrates
Authors: Masuda Yoshihiro , Hariguchi Yosuke , Konno Yoshihiro , Kurihara Masanori , Ouchi Hisanao 
Published: July 2010

In April, 2009 the Japan's Methane Hydrate R&D Program moved on to Phase 2 in order to establish the technology platform for commercial gas production from offshore-Japan methane hydrates, and we are planning the world's first offshore methanehydrate gas production test in FY 2012. Prior to the production test, we carried out preliminary evaluation on economics of depressurization-induced gas production from a hypothetical methane-hydrate filed in Eastern Nankai Trough.

Our economic evaluation consists of the following steps. 1) Setting of a hypothetical field and production system by considering the condition of the Eastern Nankai Trough methane hydrates, such as water depth, distance from coast, hydratelayer thickness and permeability. 2) Simulation of single-well production performance by using a numerical simulator. 3) Making well completion and field production schedules based on the simulated well performance. 4) Estimation of development costs. 5) Gas-price forecasting. 6) Discounted cash flow (DCF) analysis. We selected a production system of SPAR platform plus subsea well completions, and these costs were estimated by using the Oil and Gas Supply Module (OGSM) 2009 of EIA. The field development schedule (the number and timing of wells completed) was determined to keep a constant field gas production rate of about 2 million cubic meters per day as possible.

As a result of economic evaluation, the field development project assuming 20-years gas production starting from 2019 was found to generate the net present value of about 95.5 billion yen with discount rate = 10 % (IRR = 41.7 %) under the most preferable conditions. About a half of the total development was spent by well drilling and completion. Although this study assumed a simplified and small field model, it showed the gas production from oceanic hydrates would be economically viable if our future research can remove risks and uncertainties in geological and engineering problems.

Introduction

Oceanic methane hydrates are a huge potential energy resource. Global estimate of in-place methane gas volume within oceanic hydrates is about 1-5 × 1015 m3 that is approximately 2-10 times greater than the ultimate recoverable conventional natural gas resource1. Assuming technologies can be developed to recover 10 percent methane gas from these hydrates, it will allow 34-172 year supply of natural gas to the world. Many research efforts have been recently conducted toward commercial production from methane hydrates2-4. In the winters of 2007 and 2008, gas production test by means of depressurization method was conducted by the Japan Oil, Gas and Metals National Corporation (JOGMEC), Natural Resources Canada (NRCan), and Aurora Research Institute at a permafrost MH accumulation of the Mackenzie Delta, Northwest Territories, Canada. 6 days' continuous gas production had been achieved in this test, and it proved the availability of depressurization method for gas production from permafrost MH deposits5.

At the Eastern Nankai Trough offshore Japan, MH deposits have been found at high saturations within reservoir-quality sands from oceanic environments6. The world's first offshore gas production test by depressurization method is planned in 20127. Prior to the production test we have to show that oceanic hydrates would be economically viable. Hariguchi et al. 8 discussed this matter by using well productivity faction. Walsh et al.9 recently published a paper on commercial viability of gas production from natural gas hydrates, but there are still few papers on economics of offshore methane hydrate development. This paper reports the net present values (NPVs) of the development project of a hypothetical methane-hydrate field in Eastern Nankai Trough. Field gas production schedules are determined from simulated single-well gas production histories in applying the depressurization method.