Japan Progresses Methane Hydrate Project, Ignores Industry Downturn

Japan Progresses Methane Hydrate Project, Ignores Industry Downturn
Energy security concerns nudge Japan to press on with its methane hydrate program even as low oil prices lower the urgency to search for alternative fuels.

For a country that imports nearly all of its fossil fuels and whose domestic nuclear energy supply has fallen sharply since the Fukushima plant accident in March 2011, low oil prices have not weakened Japan’s resolve to tap alternative fuels such as methane hydrate, found under the sea floor off the country’s southeast coast. 

The Ministry of Economy, Trade and Industry (METI) has said methane hydrate offers great potential as energy sources of the future.

Japan has apparent strong interest in unlocking about 40 trillion cubic feet of methane hydrates – natural gas deposits trapped within crystallized ice structures – since state-owned Japan Oil, Gas and Metals National Corp. (JOGMEC), acting on METI’s behalf, led the country’s first successful testing of the resource in the Nankai Trough in March 2013. That drilling operations ended prematurely due to an equipment problem caused by sand from the soil layer.

METI officials have said plans are underway for a second round of production testing for methane hydrates off the coast of Aichi and Mie prefectures in the first quarter of 2017, according to press reports. The exploration site is believed to hold sufficient reserves to provide Japan with a decade’s supply of natural gas.

Work Continues as Planned

Ahead of a planned month-long offshore production test next year, JOGMEC and operator Japan Methane Hydrate Operating Co. Ltd. (JMH) reportedly deployed the Chikyu deepwater drilling vessel 50 miles off the Atsumi peninsula, the site of the previous test, to complete preparatory work.

“The job we did in May and June is the preparation work for the flow test. We have drilled one wells for geological survey, two monitoring wells and part of two production wells,” Dr. Yoshihiro Nakatsuka, deputy director, Project Coordination Team and leader of the Environmental Assessment Sub Team of JOGMEC’s Methane Hydrate Research & Development Group, told Rigzone.

The preparation work was carried out to study technical issues such as sand control, gas water separation and monitoring that had emerged during the first production test. Such issues have to be addressed if commercialization of methane hydrate production is to be realized.

“The objective of this second test is to verify the effectiveness of countermeasures from the first production test,” Nakatsuka said.

In the 2013 production test, JOGMEC produced around 4.2 million cubic feet (120,000 cubic meters) of natural gas from methane hydrates found in the Nankai Trough. When an assessment of the recent preparatory work becomes available, the company would have to decide whether to press on with preparations for the commercial production of methane hydrates.

The preparatory work is likely to provide JOGMEC with sufficient information to resolve issues pertaining to the production system, sand control and monitoring, he said at the recent Offshore Technology Conference (OTC) Asia in Kuala Lumpur, Malaysia.

“[One of the] difficulties we faced is effective sand control and [we need to] design a system to get much more efficient gas-water separation during the production,” Nakatsuka said, adding that the team is weighing how to find solutions for the commercial systems from the conventional oil and gas sector.

While METI hopes to commence the offshore production testing in the March 2017 quarter, the schedule for first commercial production could change as the project remains in the research phase.

“It is still a plan and has possibility of change but it is true at this moment. For commercial [production] we still do not know when it will start since we are still in research phase … it is one of the research items which needs to be considered in future,” the JOGMEC official explained.

Singapore’s subsurface, subsea and surface facilities engineering and contracting solutions provider for the offshore industry, NauticAWT Ltd., recently secured a contract from JMH for engineering and project management consultation services for the topside production test system relating to the second offshore methane hydrate production test.

NauticAWT, which handled production testing design, planning and execution services for the first production test, will “directly apply its Well Test Engineering expertise to this project,” the firm said June 13 in a press release.

NauticAWT CEO John Gronbech said, when contacted by Rigzone, that the company is “not in a position to disclose or comment on the project.”

Pooling Expertise to Tap Methane Hydrate

JMH was established in October 2014 by 11 companies to participate in the government-led program on offshore production test of pore-filling type methane hydrate. The shareholders comprised seven oil and gas firms and four engineering companies.

JMH will initiate the development of technologies to realize commercial development of methane hydrate, tapping on the experience of its shareholders.

Company stakeholders include Japan Petroleum Exploration Co. Ltd. (33 percent), Japan Drilling Co., Ltd. (18 percent), Inpex Corp. (13 percent), Idemitsu Oil & Gas Co., Ltd. (5 percent), JX Nippon Oil & Gas Exploration Corp. (5 percent), Nippon Steel & Sumikin Engineering Co., Ltd. (5 percent), Chiyoda Corp. (5 percent), Toyo Engineering Corp. (5 percent), JGC Corp.  (5 percent), Mitsui Oil Exploration Co. Ltd. (5 percent), and Mitsubishi Gas Chemical Co., Inc. (1 percent).

Japanese companies with expertise in developing deepwater energy resources such as MODEC, Inc. also eyed involvement in the methane hydrate project.

A spokesperson for MODEC told Rigzone in an email that the company will “aggressively participate in any offshore energy and mineral resource development.”

The company, a major player in the floating production systems industry, has developed a deepwater air lift system (DWAL), which is similar to gas lift technology widely used in oil production enhancement, to lift energy and mineral resources from seabed.

“MODEC considers DWAL will make a significant contribution to develop seabed resources, such as natural gas hydrate, seafloor massive sulfides, cobalt rich crust, manganese nodules, rare earth rich mud, phosphate etc., in the Sea of Japan and other areas,” the spokesperson said.

Getting Tools to Develop Methane Hydrate Projects

Chiyoda – a minority shareholder in JMH – is expanding its industry competences by acquiring a 50 percent stake in EMAS AMC, the subsea services unit of Singapore’s Ezra Holdings Ltd., in March to create EMAS CHIYODA Subsea.

In June, Japanese shipping company Nippon Yusen Kabushiki Kaisha (NYK) acquired a 25 percent stake in EMAS CHIYODA Subsea, leaving Ezra and Chiyoda with 40 percent and 35 percent interest, respectively.

Japanese media Nikkei Asian Review reported that NYK’s approximately $90 million acquisition will offer the firm access into seafloor equipment engineering for oil drilling. EMAS CHIYODA Subsea has a fleet of nine offshore construction vessels that can operate different types of projects in various water depths and it specializes in connecting pipework from offshore platforms to seafloor installations.

With the government focused on tapping Japan’s subsea resources, including methane hydrate for its natural gas, engineering companies such as Chiyoda seems to be equipping themselves with the right capabilities for such an eventuality. 

Project Progress Even with Low Oil Prices

As Japan adapts to a changed energy landscape in the post-Fukushima era, the potential introduction of new supply such as methane hydrate would be welcomed, especially if it is available locally.

“Because we are in the research phase to progress the methane hydrate development to commercial production in the future, we think the fall in oil price or lower gas price in the short term does not affect [the project] so much,” JOGMEC’s Nakatsuka said.

The timeline for commercial methane hydrate production, tentatively planned for 2023,  hinges on a successful production test planned for 2017, according to news reports.

Collaborations with India

Japan, with a fairly advanced methane hydrate program, is collaborating with other countries, including India, to try to find and produce gas from the resource.

State-owned Oil and Natural Gas Co. Ltd. (ONGC) made India’s largest methane hydrate find off the Andhra coast in the Krishna-Godvari (KG) Basin in August 2015, according to news reports. The exploration campaign was undertaken in collaboration with Japanese and U.S. scientists.

“We are not in a position to discuss Japan’s role in India’s ONGC MH [methane hydrate] program but we at JOGMEC are collaborating with them under a MOU [memorandum of understanding] with one of the Indian organization,” Nakatsuka said.

ONGC intends to learn from Japan’s experience and technology in this field and hopes to start pilot methane hydrate production from 2017.


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