China, Japan extract combustible ice from seafloor
BEIJING: Commercial development of the globe’s huge reserves of a frozen fossil fuel known as “combustible ice” has moved closer to reality after Japan and China successfully extracted the material from the seafloor off their coastlines.
But experts said Friday that largescale production remains many years away — and if not done properly could flood the atmosphere with climate-changing greenhouse gases.
Combustible ice is a frozen mixture of water and concentrated natural gas. Technically known as methane hydrate, it can be lit on fire in its frozen state and is believed to comprise one of the world’s most abundant fossil fuels.
The official Chinese news agency Xinhua reported that the fuel was successfully mined by a drilling rig operating in the South China Sea on Thursday. Chinese Minister of Land and Resources Jiang Daming declared the event a breakthrough moment heralding a potential “global energy revolution.”
A drilling crew in Japan reported a similar successful operation two weeks earlier, on May 4 offshore the Shima Peninsula.
For Japan, methane hydrate offers the chance to reduce its heavy reliance on imported fuels if it can tap into reserves off its coastline. In China, it could serve as a cleaner substitute for coal-burning power plants and steel factories that have polluted much of the country with
Yields on interest- rate futures spiked, with all contracts hitting a daily oscillation limit. The volatility in the fund’s holdings worsened because longer- term interest rate futures have wider limits than shorter- term ones, Bredda said.
The fund returned between 8 and 9 percent on Friday, Bredda said, partially correcting the slump as Brazilian assets rebounded from Thursday’s plummet.
According to data from securities regulator CVM, Alaska Black held 371 million reais ($ 114 million) in assets under management at the market close on Wednesday.
Manager Adam Capital Gestão de Recursos Ltda unwound all of its positions in Brazil, swallowing an 18.2 percent loss in its high- risk Adam Advanced Master FIM CP IE vehicle and a 6 percent loss in lower risk Adam Macro II FIC FIM.
“We’ll wait until the dust settles before getting back to Brazil,” founding partner André Salgado said. “Even if the scenario improves, it’s better to miss out on the start of the rally than to remain exposed to so much uncertainty.” lung-damaging smog.
Methane hydrate has been found beneath seafloors and buried inside Arctic permafrost and beneath Antarctic ice. The US and India also have research programs pursuing technologies to capture the fuel.
Estimates of worldwide reserves range from 280 trillion cubic meters up to 2,800 trillion cubic meters, according to the US Energy Information Administration (EIA). By comparison, total worldwide production of natural gas was 3.5 billion
A few major players managed to limit the damage from this week’s losses, having hedged their bets in recent months.
Verde Asset Management SA, Brazil’s largest hedge fund, saw its holdings shrink by just 3 percent on Thursday, according CVM data. Reuters had reported the figures earlier on Friday.
That compares to an 8.8 percent drop for Brazil’s benchmark Bovespa stock index and an 8 percent slump in the Brazilian real that day.
Verde had repeatedly warned that investors were too optimistic about Congress passing Temer’s ambitious pension and labor reform agenda, calling markets “complacent” in a monthly letter on May.
Performance data obtained by Reuters from market sources showed that 11 percent of the holdings of the Ibiuna Hedge STH FIC FIM cross- asset fund were wiped out on Thursday, the biggest daily decline since it opened in 2012.
If confirmed, that nearly erased the fund’s gains this year, which had reached 12.6 percent by market close on Wednesday, when it held a total of 1.2 billion reais ($ 363 million) worth of assets, according to CVM figures.
Representatives for Verde and Ibiuna declined to comment.
This week’s losses came as Brazil’s hedge fund industry was clawing its way back from a years- long slump, as a deep recession and sky- high interest rates dampened the allure of active investment strategies.
Contracts pegged to Brazil’s benchmark CDI rate have yielded 4.4 percent so far in 2017. cubic meters in 2015, the most recent year available. That means methane hydrate reserves could meet global gas demands for 80 to 800 years at current consumption rates.
Yet efforts to successfully extract the fuel at a profit have eluded private and state-owned energy companies for decades. That is in part because of the high cost of extraction techniques, which can use large amounts of water or carbon dioxide to flood methane hydrate reserves so the fuel can be released and brought to the surface. There are also environmental concerns.
If methane hydrate leaks during the extraction process, it can increase greenhouse gas emissions. The fuel also could displace renewables such as solar and wind power, said David Sandalow, a former senior official with the US State Department now at Columbia University’s Center on Global Energy Policy (CGEP).
However, if it can be used without leaking, it has the potential to replace dirtier coal in the power sector.