Preliminary Report On The Economics Of Gas Production From Natural Gas Hydrates

doi:10.14288/1.0041033

Study

Commercial ProductionHigh ImpactStrong effect

Natural Gas Hydrate Production Viable at $10-17/Mscf with Pipeline Infrastructure

Economically viable production from North American arctic natural gas hydrate deposits is estimated to require natural gas prices exceeding $10-17/Mscf, contingent on pipeline accessibility.

cIRcle (University of British Columbia) · 2016

01

Key Findings

01Large-scale production from North American arctic Class 1 hydrate deposits is economically acceptable at gas prices over $CDN2005 10/Mscf.
02Large-scale production from North American arctic Class 2 hydrate deposits is economically acceptable at gas prices over $CDN2005 17/Mscf.
03Pipeline costs to distribution points significantly influence economic viability.
04Class 1 deposits may be viable at lower prices due to existing free gas.
05Class 2 deposits are considered the most likely to be economically viable among deposits where hydrates are the sole hydrocarbon source.

02

Application

Design takeaway

Designers and engineers involved in energy resource development must consider the projected market price of natural gas and the significant cost implications of associated infrastructure, such as pipelines, when evaluating the feasibility of projects involving natural gas hydrates.

How to apply

When assessing the commercial viability of a new energy extraction project, conduct a sensitivity analysis that incorporates projected commodity prices, estimated extraction costs, and the capital expenditure required for necessary infrastructure.

Project actions

01When proposing a new product or system, research the current and projected market prices for the materials or energy it will use.
02Factor in the cost of any necessary infrastructure or distribution channels required for your product to reach the end-user.

03

Method & Evidence

AimTo estimate the natural gas price required for economically viable production from promising natural gas hydrate accumulations in the North American arctic region.

MethodEconomic simulation and analysis of compiled studies on simulated natural gas hydrate reservoirs.

ProcedureResearchers compiled economic studies of simulated natural gas hydrate reservoirs to estimate the price of natural gas that would make production economically viable from the most promising accumulations. They specifically analyzed Class 1 and Class 2 hydrate deposits in the North American arctic, considering the impact of pipeline costs and the presence of free gas.

ContextNatural gas extraction from hydrate deposits in the North American arctic region.

Variables

IVNatural gas price, presence of free gas, pipeline construction cost.

DVEconomic viability of natural gas production from hydrates.

CVClass of hydrate deposit (Class 1, Class 2), geological and depositional environment, amount of gas in place.

04

Strengths & Limitations

Strengths

+Provides quantitative economic estimates for a novel energy source.
+Considers multiple influencing factors including infrastructure costs and geological deposit types.

Limitations

The economic viability of natural gas hydrate production is highly sensitive to fluctuating natural gas prices and the significant upfront investment required for pipeline construction, which can be prohibitive in remote arctic regions.

Reliability & validity

The study compiles existing economic studies, suggesting a reliance on the validity and reliability of those underlying analyses. The estimates are presented as 'rough lower bounds' with error bars, indicating an awareness of uncertainty.

Think critically

How might advancements in pipeline technology or alternative transportation methods (e.g., liquefaction) alter the economic viability of natural gas hydrate production at lower market prices?

05

Design Principles

"Economic viability of resource extraction is a function of market price, extraction cost, and essential infrastructure development."

This research provides critical economic benchmarks for the feasibility of extracting natural gas from hydrate formations. Understanding these price thresholds is essential for strategic investment decisions, resource development planning, and assessing the potential of novel energy sources within the broader energy market.

06

What This Means for Your Design

To make money from special ice-like gas deposits (hydrates) in the Arctic, the price of natural gas needs to be around $10 to $17 per unit, and you also need to be able to build a pipeline to sell it.

How to use in your project

1.Use the estimated price points as a benchmark for evaluating the economic feasibility of your own design project, especially if it involves resource extraction or energy production.
2.Discuss how infrastructure costs (like transportation or distribution) could impact the overall viability of your design.

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Add to My Project

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Quick Cite

(2016). PRELIMINARY REPORT ON THE ECONOMICS OF GAS PRODUCTION FROM NATURAL GAS HYDRATES. cIRcle (University of British Columbia). https://doi.org/10.14288/1.0041033 Retrieved from https://designdex.org/study/996d72a0-86b8-42eb-8947-1d9167c465bc/natural-gas-hydrate-production-viable-at-10-17-mscf-with-pipeline-infrastructure

Paragraph starter

The economic feasibility of natural gas hydrate production is estimated to require market prices of $10-17/Mscf, with significant dependence on the cost of pipeline infrastructure. This highlights the critical interplay between resource extraction technology, market economics, and essential logistical networks in determining the commercial viability of novel energy sources.

09

Source

cIRcle (University of British Columbia)

PRELIMINARY REPORT ON THE ECONOMICS OF GAS PRODUCTION FROM NATURAL GAS HYDRATES

journal · 2016

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Questions about this research

What does the research say about natural gas hydrate production viable at $10-17/mscf with pipeline infrastructure?: Designers and engineers involved in energy resource development must consider the projected market price of natural gas and the significant cost implications of associated infrastructure, such as pipelines, when evaluating the feasibility of projects involving natural gas hydrates. Evidence: cIRcle (University of British Columbia) (2016).
Why does "Natural Gas Hydrate Production Viable at $10-17/Mscf with Pipeline Infrastructure" matter for design?: This research provides critical economic benchmarks for the feasibility of extracting natural gas from hydrate formations. Understanding these price thresholds is essential for strategic investment decisions, resource development planning, and assessing the potential of novel energy sources within the broader energy market.
How can designers apply this research?: Designers and engineers involved in energy resource development must consider the projected market price of natural gas and the significant cost implications of associated infrastructure, such as pipelines, when evaluating the feasibility of projects involving natural gas hydrates.
What were the main findings?: Large-scale production from North American arctic Class 1 hydrate deposits is economically acceptable at gas prices over $CDN2005 10/Mscf.. Large-scale production from North American arctic Class 2 hydrate deposits is economically acceptable at gas prices over $CDN2005 17/Mscf.. Pipeline costs to distribution points significantly influence economic viability.. Class 1 deposits may be viable at lower prices due to existing free gas.
What research method was used?: Economic simulation and analysis of compiled studies on simulated natural gas hydrate reservoirs..
How strong is the evidence?: Evidence strength is rated Strong effect, based on a 2016 journal from cIRcle (University of British Columbia).
What should I do differently in my next project?: When assessing the commercial viability of a new energy extraction project, conduct a sensitivity analysis that incorporates projected commodity prices, estimated extraction costs, and the capital expenditure required for necessary infrastructure.
What are the limitations?: Estimates are rough lower bounds with positive error bars. Specific project economics are highly dependent on detailed geological conditions, gas in place, depositional environment, existing infrastructure, and local taxes/tariffs. Marine hydrate deposit production is noted as being more expensive than conventional marine gas reservoirs.
Is there evidence that natural gas affects design outcomes?: Producing natural gas from arctic hydrate deposits is estimated to be economically feasible when gas prices are above $10-17 per thousand standard cubic feet, provided that the cost of building pipelines to transport the gas is not too high. The presence of existing free gas in some deposits can lower the required pric Source: cIRcle (University of British Columbia) (2016).
Where does this gas hydrate research apply?: Natural gas extraction from hydrate deposits in the North American arctic region. It sits within commercial production research on designdex.org.