A Kindred Spirit
I have a very busy travel schedule this week, so this one is a little bit late and a bit rushed.
Last week I had the pleasure of meeting Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS). It was a funny sort of meeting, because I didn’t know he was coming, as he had come to visit someone else. When I was introduced to him we both said to each other “Hey, don’t I know you?”
We figured out that the reason we knew of each other is that we have both been advocates of using methanol as fuel. In fact, I referenced Dr. Luft and his frequent co-author Anne Korin in my book Power Plays. During his visit, he left a copy of their most recent book Petropoly: The Collapse of America’s Energy Security Paradigm
I managed to get through the book during my recent travels (and I can highly recommend it), and our respective positions on energy issues are remarkably similar. I would say that on perhaps 90 percent of the energy issues he discussed we are in total agreement. There aren’t a lot of other people I can say that about.
A Few Disagreements
However, I can point out three differences in our respective positions. First, it seemed that climate change was really an afterthought in the book. The global warming potential of methane was mentioned, but I didn’t get the impression that the authors are as concerned as I am about the potential threat of a continued expansion of fossil fuel consumption.
Second, they dismissed the impact of higher prices on reducing oil demand. The example they used was Iran, which increased the price of gasoline by 75 percent in response to tight supplies arising from sanctions. They point out that this only reduced demand by 8 percent. But then later in the book they acknowledge that demand fell sharply in the US as oil prices spiked.
I think the issue is whether there is a lot of discretionary consumption, which is a point I have stressed in the past. In developing countries where oil is used at a much lower level and for more essential functions, demand is indeed pretty inelastic. In developed countries, it is a lot easier to curb some discretionary consumption, which is what we have done. Thus, the trend over the past few years has been that as oil prices increased, demand fell in developed countries but continued to increase in developing countries.
Methane Hydrates: The Ice That Burns
The third disagreement is the topic of this column: Methane hydrates. Methane hydrates are compounds in which methane (natural gas) forms an ice-like crystalline compound with water. Methane hydrates are flammable in the crystalline form, and methane can be extracted from them and burned. The methane hydrate resource is immense—much larger than the conventional resource base for natural gas. But the deposits occur primarily on and under the ocean floor, and to a lesser extent in the Arctic permafrost, and there is presently no way to economically extract them.
Nevertheless, countries are working to commercialize the extraction of methane hydrates. Japan and China are both engaged in long-term commercialization efforts, and the United States is conducting research into the potential of methane hydrates.
But here is my potential disagreement with Dr. Luft. In Petropoly, he makes the argument that the potential for methane hydrates is so huge that it may render shale gas a historical footnote. He is correct about that; the potential resource is enormous. The US Department of Energy estimated that methane hydrates may contain 50-500 times as much gas as the current US natural gas resource base. In terms of global gas reserves, the total global reserve in 2012 was estimated to be 6.6 quadrillion cubic feet of natural gas. The methane hydrate resource (all of the estimated gas in place, whereas “reserves” refer to gas that is economical to produce) is estimated to be 100 to 1,000 quadrillion cubic feet.
Burning Up the Environment
While this is certainly enough gas to potentially render shale gas a historical footnote, the environmental backlash that would result from widespread commercialization of methane hydrates could also render the shale gas protests a historical footnote. Methane is a much more powerful greenhouse gas than is carbon dioxide, and development of the hydrates would both increase the amount of methane in the atmosphere — because some would surely leak to the air during collecting and processing — and increase the atmospheric carbon dioxide concentration as the methane is burned for power.
Thus, from my perspective there is tremendous environmental risk from commercial development of methane hydrates. This is a risk I stress any time someone asks me about methane hydrates, but a risk that Petropoly failed to note. In fairness, I called it a “potential disagreement” because the authors may be well aware of these risks but simply failed to mention them in their short blurb on the hydrates. But if they didn’t mention it because they believe there isn’t significant environmental risks from methane hydrate development, then we have a definite disagreement on that point.
Conclusion: Tread Cautiously
I think economic viability is a long shot in any case, but my advice would be to tread very cautiously on the methane hydrates. I think there is a lot of lower hanging fruit that comes with much less environmental risk.