International Conference on Gas Hydrates (ICGH) (6th : 2008)

PRELIMINARY REPORT ON THE ECONOMICS OF GAS PRODUCTION FROM NATURAL GAS HYDRATES Walsh, Matt; Hancock, Steve H.; Wilson, Scott; Patil, Shirish; Moridis, George J.; Boswell, Ray; Collett, Timothy S.; Koh, Carolyn A.; Sloan, E. Dendy


Economic studies on simulated natural gas hydrate reservoirs have been compiled to estimate the price of natural gas that may lead to economically viable production from the most promising gas hydrate accumulations. As a first estimate, large-scale production of natural gas from North American arctic region Class 1 and Class 2 hydrate deposits will be economically acceptable at gas prices over $CDN2005 10/Mscf and $CDN2005 17/Mscf, respectively, provided the cost of building a pipeline to the nearest distribution point is not prohibitively expensive. These estimates should be seen as rough lower bounds, with positive error bars of $5 and $10, respectively. While these prices represent the best available estimate, the economic evaluation of a specific project is highly dependent on the producibility of the target zone, the amount of gas in place, the associated geologic and depositional environment, existing pipeline infrastructure, and local tariffs and taxes. Class 1 hydrate deposits may be economically viable at a lower natural gas price due largely to the existing free gas, which can be produced early in project lifetimes. Of the deposit types for which hydrates are the sole source of hydrocarbons (i.e. Class 2, 3, and 4 deposits), theoretical simulation studies imply that Class 2 deposits may be the most likely to be economically viable (with all else equal) due to assistance that removal of the underlying free water will provide to depressurization; thus $CDN2005 17/Mscf can be seen as a lower bound on the natural gas price that may render hydrate deposits economically acceptable in the absence of free gas. Results from a recent analysis of the production of gas from marine hydrate deposits are also considered in this report [6]. On a rate-or-return (ROR) basis, it is approximately $2008 3/Mscf more expensive to produce from a Class 3 marine hydrates than a conventional marine gas reservoir of similar size.

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