Risk-reward? Pursuing natural gas offshore

This photo from the U.S. Geological Survey shows a core sample of mud containing methane hydrate, ice-like crystals that form at low temperatures and high pressure, taken from the ocean floor off the coast of Southern California.

It's called fire ice: methane hydrate, the natural gas lying off South Carolina, the fuel widely acknowledged to be driving a campaign to open the deep ocean offshore to oil and natural gas exploration.

The volatility of the gas - more than any conventional seismic testing or exploratory drilling - frightens conservationists and some scientists. This stuff, a vast potential energy resource, also could be a bomb waiting to go off, they fear.

"If we're going after it, we'd better be careful," said Richard Charter, senior fellow at the Ocean Foundation, a nonprofit ocean conservation advocate.

Two catastrophes, he said, make the point:

In 2010 the Deepwater Horizon oil drilling rig blew apart, killing 11 people and spilling more than 200 million gallons of crude into the Gulf of Mexico.

About 8,000 years ago, an undersea cliff collapsed off Norway, plowing out enough of the bottom to bury Scotland and setting off a tsunami as huge as the 2004 wave that killed more than 200,000 people along Indian Ocean coastlines.

What the two very likely had in common is a methane hydrate eruption.

The hydrate isn't your usual natural gas. It's essentially gas encased in ice under tremendous pressure due to the cold and the crush of gravity under the deep sea.

Mining it there is as perilous as chiseling into a vast propane tank. So why bother? It's virtually a perpetual tap. There's thought to be more methane hydrate worldwide than all the other oil, natural gas and coal resources combined, according to Geosciences News and Information.

In the short term, it's too far out, too deep, and the extraction far too ticklish to go after. But as other resources become more scarce, harder to retrieve and the mining more opposed, methane hydrates get more attractive.

Japan, which has never had an oil or gas resource of its own, isn't waiting. In early 2013 the country announced that it had successfully produced the gas from an offshore well drilled in 2012 in a joint project with the United States. Japan now hopes to be producing commercially within the decade.

About the same time, an experimental drilling in Prudhoe Bay on the Alaskan north shore produced 1 million cubic feet of the stuff. That was a $29 million collaborative project among the U.S. Department of Energy, ConocoPhillips and Japan Oil, Gas and Metals National Corp.

Most oil companies now have at least a working group researching the gas.

"The oil corporations can smell something," Charter said about the resource potential.

Along South Carolina, methane hydrate beds sit more than 100 miles offshore on the Blake Plateau, a plunge of the Continental Shelf more than 1,500 feet deep - too far out and too deep, analysts say. Japan's beds sit fewer than 50 miles offshore. The Blake beds might well be the only gas or oil out there in any volume worth extracting, previous studies have indicated.

But at least a half-dozen exploration companies already have applied for permits to explore off the East Coast. All of them want to look off South Carolina.

To explore the area off this state alone could cost a company some $4 million or more, not an insignificant amount for a firm that sells its findings.

Why the competition if there's no real cost benefit to going after the methane? Leases.

The companies expect to sell their results to oil companies, which would apply to the federal government for leases. The federal Bureau of Energy Management in August 2013 put off deciding whether to grant those leases, but at least some form of approval is widely expected.

Much like the Gold Rush or the Oklahoma land rush, the effort offshore is a quest to get the first stake in a claim. Once a company holds title to a lease, there are ways to extend it and not have to pay the royalties, Charter said. One way or another, "you corner the market on that particular piece of ocean."

Mitchell Colgan isn't so sure. Colgan is a College of Charleston geology professor who formerly worked in exploration research for Shell Oil Co.

"The problem you face is how much money you pay for that lease," he said. Shell Oil paid more than a half billion dollars for a lease off Alaska more than two decades ago, but that was in an area rich with beds that also could be claimed by Russia. Those hydrates are much closer to shore than those off South Carolina.

Also, oil companies would be more attracted to abundant methane hydrate beds in locations like Alaska or the Gulf of Mexico, where some of the recovery infrastructure and equipment already is in place, Colgan said. Off South Carolina, you would be starting from scratch, to go after a supply not expected to be nearly as plentiful as other locations.

"There would be good reasons for Japan to try to get it," Colgan said, but even with the recent success there, the companies still haven't solved the problem of how to get at enough of the gas safely enough to make it cost-beneficial.

"If you solve that problem, then you go where it's closer to shore," he said. On the Blake Plateau, "all the hydrates are on the slope, a tremendously unstable area."

But Charter insists "it's not paranoid at all" to think (oil companies) are interested. In the Gulf of Mexico, companies for years avoided drilling deep ocean oil wells because of the methane hydrate beds, the depth and distance from shore, and danger. Now they are drilling in areas like Deepwater Horizon.

"The bottom line is methane hydrates aren't ready for prime time," he said, but the technology and need might be only 10, 12, 15 years away. In other words, the Blake beds might be harvestable within the time span of the life of the lease.

Very little is known about the environmental concerns of going after methane hydrate, Charter said. What is known is that "as currently conducted, it's extremely dangerous."

The extraction process differs from fracking, the problematic and controversial gas extraction now underway onshore. But it's similar in that hydraulic fracturing injects fluid underground at great pressure, while methane hydrates already are under pressure.

Fracking is not particularly efficient, injecting huge volumes of water and potentially polluting groundwater supplies. A "dirty little secret" about fracking is that it burns off about 50 percent of the natural gas that could be recovered, Charter said.

In South Carolina, the methane hydrates pot is actively being boiled by federal and state legislators pushing bills to promote offshore exploration and drilling, citing the potential revenue. But state waters end 3 miles off the coast; the beds, of course, are a lot farther out. Federal rules specify that royalties in those regions are paid to the federal government, not the states.

State legislators "think that somehow or another somewhere they will be able to rewrite federal law to reap some royalties. That's a pipe dream. Residents are being sold a bill of goods, a red herring, to open the coast (to drilling) and not consider the value of a clean coast to an economy dependent on it," Charter said.

In South Carolina, Colgan said, talking up oil and gas is "a political game that's being played that people are being cute about. There isn't any oil. There isn't any natural gas in our environment."

As for the methane hydrates offshore, "It's almost impossible to get, and if you could get it, you wouldn't get it here. Farther north the ice is closer to the surface," Colgan said.

Reach Bo Petersen at 937-5744, @bopete on twitter or Bo Petersen Reporting on Facebook.