Are Methane Hydrates Really Going to Change Geopolitics? [View all]

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http://www.theatlantic.com/technology/archive/2013/05/are-methane-hydrates-really-going-to-change-geopolitics/275275/



The right way to understand the potential of unconventional fuels like methane hydrates and tight oil is to closely examine their production rates and their prices. If these fuels can be produced at large scales and profitable prices, they very well might influence geopolitics and economics in the ways that Mann speculates. If they cannot, then it truly doesn't matter how much of those resources may exist underground and in the ocean floor.

Unfortunately Mann offers precious little data on price or production rates.

f Mann's data on methane hydrates is correct, then Japan's experiment so far has taken 10 years and $700 million to produce four million cubic feet of gas, which is worth about $16,000 at today's U.S. gas prices, or about $50,000 at today's prices for imported LNG in Japan. At this point, it is an enormously expensive experimental pilot project, and nothing more. We do not yet know when it might be able to recover commercial volumes of gas, or at what rate, or at what price. We have no reason to believe that if commercial quantities are recoverable by 2018 as Japan hopes--which seems incredibly optimistic--that the price of that gas will be competitive with imported LNG.

At the same time, we have numerous forecasts projecting that renewables like wind and solar will be competitive with fossil-fueled grid power in most of the developed world by 2020, including much of Asia. For example, a recent report by Citigroup, and another by researchers at Stanford University, among many others. A 2011 report by WWF and Ecofys projects that by 2018, solar PV will be the cheapest way to generate power in much of Asia. If these forecasts--based on more than a decade of real-world cost data for large-scale solar and wind are correct, then there is no reason to believe that gas from Japan's methane hydrate experiment will be able to compete with renewable grid power, which would constitute the largest market for that gas (unless Japan rapidly deploys natural gas vehicles in the interim, which it currently has no economic reason to do).