From one perspective, the pursuit of unconventional resources, including gas hydrate, is completely unnecessary. Worldwide the proven reserves of conventional gas are enormous - in excess of 6,000 TCF - and have doubled over the past 20 years. In 2004 these reserves represented 67 years of consumption. In addition, large new conventional discoveries are still being made. This leads to the question: Why bother with gas hydrate as a resource? To answer that question we must consider gas hydrate in the broader context of natural gas supply and demand.
In locations with large reserves and few consumers, natural gas is virtually a worthless byproduct of petroleum operations. Throughout the twentieth century large volumes of gas have been flared or vented for lack of a viable market. While this practice is decreasing due to environmental considerations, nearly 10 BCF of gas continues to be flared or vented worldwide each day.
Where there are no pipelines connecting supply to demand, the economics of natural gas are far different from those of oil. Without pipelines, oil is still very easy to transport by ship. Transporting natural gas by ship requires its liquification (and then the regasification of the LNG at a receiving port). This is an expensive process, although with increased experience, the costs associated with the LNG process have dropped significantly in the past 5 years. Indeed, many in industry see LNG as the solution to the natural gas needs of the industrial world. The expansion of LNG markets challenges the viability of unconventional gas resources.
The expansion of other conventional gas operations also impacts the future of unconventional resource development. For the United States, new pipelines from the Alaskan and Canadian Arctic and the expansion of infrastructure in the Rocky Mountains may significantly decrease the need for unconventional gas. The pipeline capacity for natural gas in the deepwater Gulf of Mexico is so constrained that the National Petroleum Council has reported that there will be no room for gas from hydrate for 20 years. These issues present a challenge to any unconventional gas resource.
In spite of these obstacles, a realistic case can be made for unconventional gas, including gas hydrate. First, there is a growing gap in Canada and the United States between wellhead delivery and consumption. The combined gas production of the US and Canada appears to have peaked in 2002 and is declining at an annual rate of 6%. Meanwhile demand in the United States is increasing. The National Petroleum Council projects the demand to increase from the current 23 TCF/year to 30–34 TCF/year by 2025.
LNG will play an important role in filling the gap between supply and demand, yet an over-reliance on LNG raises a number of concerns as well. First, is the vulnerability of supply. Most of the large and growing conventional gas reserves available for export are in unstable regions of the world - the Middle East, the former Soviet Union, Southeast Asia, and West Africa.