The World’s Next Energy Bonanza

The fracking of shale gas may have substantially shifted the global energy landscape, but another hydrocarbon resource—oceanic methane hydrates—has the possibility to do even more to change the picture. Formed only under the unusual combination of low temperatures and high pressure under the ocean subsurface and in permafrost regions at high latitudes, the potential of these hydrates is truly extraordinary. Depending on economics and technology, they could potentially supply the world with more than 1 million exajoules of energy, equivalent to thousands of years of current global energy demand. And they are nearing commercial production, with some ventures looking to be only half a decade away. That’s why it is time now to think about how to govern their use.

Ocean hydrates consist of methane—essentially natural gas—trapped in icelike cages called clathrates on the ocean floor. Originally discovered in the mid-20th century, the hydrates have long been a focus of national energy research programs. Recently, key demonstration projects have shown that producing natural gas for energy use from hydrates is technically feasible. And Canada, China, Japan, and the United States have all begun testing extraction processes. The race is on.

Although the economics of hydrate production remain highly uncertain, the coming boom raises at least two major governance challenges. First, hydrates are present off the coasts of many countries worldwide. While this makes them attractive from an energy security perspective, it also raises international cooperation issues. Second, they have significant potential environmental impacts, both in terms of production-related concerns (an uncontrolled leak could be catastrophic) and in terms of greenhouse gas emissions from their use (likewise with enormous possible consequences).

The widespread nature of methane hydrates could upend the global energy trade. Existing oil and natural gas deposits are geographically limited to certain regions, leading to the trade patterns and associated geopolitics—conflicts in the Middle East, pipeline disputes in Eurasia, and so on—we see today. But the prevalence of hydrates offshore of many countries could enable large and emerging energy importers, including China, Japan, and South Korea, to reduce their dependence on others. For other coastal nations, hydrates could represent a first major indigenous energy resource, which is both a development and export opportunity—and the start of a possible resource curse.

Under the statutory and customary United Nations Convention on the Law of the Sea, nations can claim territorial waters up to 12 nautical miles from their land-based shore. Beyond territorial waters and an accompanying contiguous zone, they can also claim an exclusive economic zone (EEZ) of up to 200 nautical miles or 350 nautical miles off their coast if they can demonstrate that the undersea floor is a continuation of their land-based continental plate. Although a nation’s EEZ is considered international waters for many purposes, a country is granted exclusive control over resource rights there, including seafloor resources like methane hydrates. Although there are some hydrates in territorial waters and in the internationally managed high seas, most are located within claimed EEZs.

Accordingly, the economic and environmental governance of these deposits will occur at a national level. In some cases, the process will be relatively straightforward and an extension of existing oil and gas law. In others, however, the presence of such a valuable new resource could exacerbate existing territorial disputes. The most contested waters in the world, including the South China Sea and the Arctic, contain substantial amounts of methane hydrates. The South China Sea in particular is concerning as it is China’s largest potential source, yet the country’s most aggressive territorial claims there have been rejected internationally. Beyond EEZs, hydrates in the high seas are the responsibility of the International Seabed Authority, which has focused less on hydrate governance than on other deep-sea mining regulations.

Although there is plenty of reason to worry about the changes methane hydrates will bring to energy geopolitics, a focus on the early development of strong and fair governance can help mitigate the risks of conflict. Oil and gas deposits located in EEZs have long been a source of territorial disputes; in many cases, bilateral joint production agreements have helped countries move beyond the spats to the benefit of both parties. Further, the large size of hydrate deposits means that, unlike relatively rare oil and gas deposits, there are vast amounts of resources in undisputed territory.

Beyond governance considerations, hydrates also have environmental risks. Although recent research has indicated that the chances are relatively low, hydrate production could potentially destabilize the seafloor and cause large submarine mudslides and accompanying tsunamis. Similarly, as methane is a potent greenhouse gas, seafloor production could release large amounts of methane into the water and eventually the atmosphere. Beyond these low-risk, high-impact environmental concerns, many local environmental impacts on fisheries and the marine environment are almost certain to occur. And of course, burning methane hydrates could exacerbate global climate change.

There are also potential environmental benefits, though. Natural gas hydrates can reduce greenhouse gas emissions if they are used to replace coal or if their use comes with the required implementation of carbon capture technologies. One way to uncover hydrates involves replacing the methane with carbon dioxide, meaning that hydrate reservoirs could double as carbon sequestration reservoirs, which are limited on land.

If methane hydrates are to be extracted responsibly, the world needs to create strong regulations to protect the marine environment and the atmosphere. Given how widespread the reserves are, these regulations should be global, although regional environmental management plans, such as those used for other deep-sea mining activities, could help mitigate risks in deposits that cross multiple EEZs.

Just as the shale revolution has transformed the energy economic and security situation of the United States, widespread use of methane hydrates could upend global energy markets. Countries that are traditionally energy importers or have poor energy resources could have a scalable and abundant energy source for the first time. Traditionally, coal has been used, as it is one of the most common national energy resources—hydrates could rival its ubiquity, displacing the fuel where it is used now and preventing its adoption elsewhere. This source still, of course, comes with environmental perils—but it also offers the promise of global energy abundance.