Saturday, Jun 07, 2008

AOMORI, Japan (Dow Jones)--With surging fuel costs forcing consuming countries to diversify their energy sources, the United States and Japan announced a plan Saturday to work together to explore and produce methane hydrate.

The proposed cooperation, which would last three years, involves the sharing of scientific and technical information as well as field testing of production capabilities in Alaska.

A mixture of methane gas trapped in frozen water molecules - it has been called "ice that burns" - methane hydrate is considered one of the next major frontiers of energy exploration. Methane hydrate deposits are found in permafrost regions and along the coastlines of every continent.

The Nikkei newspaper has reported that the joint plan envisions converting methane hydrate into methane gas and water underground. The gas will be collected underground and transported for production and sale in a manner similar to natural gas.

But the resource is far from commercialization: According to some estimates, it will be about a dozen years before the hydrates can be brought to market as a fuel source. In addition, some worry that methane - a potent greenhouse gas - could be vented into the atmosphere during the process.

The statement of intent, released ahead of a meeting of G8 energy ministers that begins here Saturday night, says the collaboration between the U.S. Department of Energy and Japan's Ministry of Energy, Trade and Industry aims to "accelerate research into the geologic occurrence, distribution, exploration and production" of methane hydrate.

The plan to pursue methane hydrate production comes as crude oil prices have surged in recent months, with the cost of benchmark West Texas Intermediate crude oil for July delivery settling at an all-time high of $138.54 on the New York Mercantile Exchange Friday.

Crude prices have "become a serious risk factor, not only for energy security but also for the global economy," Akira Amari, Japan's minister of economy, trade and industry, said Saturday at the start of a meeting of five of the world's largest consumers of energy shortly after the U.S.-Japan plan was announced.

-By Michael S. Arnold, Dow Jones Newswires; 81-3-5255-2929; michael.arnold@dowjones.com

(END) Dow Jones Newswires

07-06-08 0423GMT