Flammable ice, or methane hydrate, sounds like an oxymoron. Methane hydrates look like ice, but if you hold a match near them, they burn.  

Methane hydrate is formed when methane and freezing water are fused under enormous pressure. The resource generally exists beneath the ocean floor or in Arctic and Antarctic permafrost. When melted, one cubic meter of methane hydrate yields 164 cubic meters of natural gas.  

This has long fascinated geologists. 


According to the U.S. Geological Survey, the world's total methane hydrate resource may contain more organic carbon than the world's oil, coal, and other forms of natural gas combined. Analysts estimate that there may be anywhere from 10,000 trillion cubic feet to more than 100,000 trillion cubic feet of natural gas in the world's methane hydrate. 

Large potential but not ready for prime time
Many see similarities between methane hydrate now and shale a decade ago.

Like shale ten years ago, many countries are intrigued by methane hydrate's potential but cannot figure out how to economically harness it. Currently the cost to extract natural gas from methane hydrate is estimated to be around $30 to $60 per mmBTU versus the current spot price for natural gas of around $4/mmBTU for United States and $19/mmBTU in Japan.

Like shale now, methane hydrate has the potential of changing the geopolitical map. Countries that currently depend on petroleum imports, such as South Korea and Japan, can benefit greatly and realize better energy autonomy.

Not coincidentally, both countries, in addition to China and the United States, are doing research on how to harness the resource. 

Despite the large amount of intellectual firepower behind methane hydrate research, harnessing methane hydrate economically is still about a decade or two away. Japan estimates that methane hydrate could be economical in a decade or so while China's Ministry of Land and Resources estimates that it could be 10 to 15 years. 

Not everyone is eager to adopt methane hydrate. Environmentalists are concerned about the potential for methane, a potent greenhouse gas, leaking into the atmosphere in the process of extraction. Although methane stays in the atmosphere for a shorter time than carbon dioxide, it is about 20 times more effective at trapping heat than carbon dioxide.  

The environmentalists' concerns, however, are dismissed by some scientists. Ray Boswell, a program manager for the Department of Energy, says the potential for methane leakage in methane hydrate extraction is no higher than methane leakage in the process of drilling for natural gas in shale. 

The bottom line
In addition to governments, some oil companies are also doing research on methane hydrate. ConocoPhillips , along with the U.S. Department of Energy and Japan Oil, Gas, & Metal National Corp, ran a successful gas hydrate production trial with CO2 exchange technology in 2012. 

In addition to oil majors that extract the material, oil service companies will likely benefit when methane hydrate becomes economical.

Because of the enormous upstream investments likely required to extract natural gas from methane hydrate, leading oil service companies such as Schlumberger and drill bit maker Baker Hughes will likely realize greater revenues. Those oil service companies have benefited greatly from the shale revolution and will likely benefit from methane hydrate extraction as well.

Due to the resource's large potential, many countries and some oil companies are currently working on ways to harness methane hydrate economically and will benefit greatly when that event occurs.

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The article Can This Energy Source Change the World? originally appeared on Fool.com.

Jay Yao has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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