Inpex to Use Bacteria at Old Oil Wells to Produce Gas

By Shigeru Sato and Yuji Okada
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Sept. 29 (Bloomberg) -- Japanese researchers have developed a method of using bacteria found in depleted oil wells to turn leftover crude into natural gas, a technique that could help meet 10 percent of the country's demand for the fuel.

Inpex Holdings Inc., Japan's largest energy explorer, has produced methane using microbes and crude residue from the 139- year-old Yabase field in northern Japan, said Haruo Maeda, director of a laboratory operated by Teikoku Oil Co., an Inpex unit. A 2 billion yen ($19 million) trial will start in 2015 to decide if gas can be produced commercially at Yabase, he said.

Oil prices have more than tripled since 2002, making it attractive to invest in fields and technologies previously thought unviable. Inpex's trial at Yabase, Japan's biggest field in the 1950s, may help the world's fourth-largest energy consuming nation cut its $30 billion annual liquefied natural gas import bill.

``If oil stays above $100 a barrel in years ahead, it may be worth trying this unique technique,'' Hirofumi Kawachi, senior energy analyst at Mizuho Investors Securities Co., said in Tokyo. ``Development costs are the key for Inpex to determine whether or not to push ahead with this project.''

Inpex's shares fell 6.1 percent to 918,000 yen in Tokyo.

Goldman Sachs Group Inc. on Sept. 17 forecast oil prices in New York to average $123 a barrel in 2009, even as it slashed the outlook from $148 because of the global credit crisis. The benchmark crude contract was at $103.87 a barrel at 4:47 p.m. in Tokyo today in after-hours electronic trade.

Oil Extraction

The U.S. Energy Information Administration in June forecast that demand for liquid fuels will rise to 112.5 million barrels of oil equivalent a day by 2020. That's a 30 percent increase from the Paris-based International Energy Agency's 2008 estimate of 86.8 million barrels.

Conventional oil extraction exploits only 30 percent to 45 percent of underground deposits, said Kensuke Kanekiyo, managing director of the Institute of Energy Economics, Japan.

Inpex aims to turn the rest into cleaner-burning gas, Maeda said. The Yabase field trial will also help determine the cost of producing the fuel commercially, he said.

Yabase could supply 10 percent of Japan's annual gas needs if Inpex's trial is successful, said Kazuhiro Fujiwara, assistant general manager of Hiroshima-based Chugai Technos Corp., who led a group of researchers that came up with a way to use two types of bacteria to produce methane.

One kind of oil-eating microbes turns crude into hydrogen and the second reacts with hydrogen and carbon dioxide, which is added, to produce methane, according to Inpex's Maeda. These bacteria have also been cultivated in a laboratory as part of a three-year study by Inpex and Tokyo University, he said.

1926 Proposal

Researchers including Fujiwara and Maeda published a joint paper on the subject in May in the Journal of Environmental Biotechnology.

The use of bacteria to improve oil recovery was first proposed in a 1926 paper published in the Industrial Engineering and Chemical News. Researchers in the former Soviet Union began observing bacteria in underground oil wells in 1930s and subsequent studies were held in the West and the Middle East.

Data from these older studies weren't enough to help boost oil recovery, Japanese researchers said in the May paper.

Inpex has found bacteria that can penetrate wells as deep as 1,500 meters and produce methane gas at temperatures as high as 55 degrees Celsius (131 degrees Fahrenheit), Maeda said. The experimental technique could potentially be used at oil wells in China and Indonesia, according to Fujiwara.

Field Experiment

In its field trial, Inpex plans to inject carbon dioxide into an oil well using a steel pipe, according to a project concept prepared by the company. The well will then be sealed to allow bacteria to produce methane, which will be extracted through another pipe and stored in tanks on the surface.

The presence of various gases in the well would need to be regulated because oxygen kills the bacteria and too much carbon dioxide may slow the rate of methane production, Maeda said.

While the hydrogen- and methane-producing microbes exist in the well, externally cultivated bacteria can be added if needed to increase fuel production, Fujiwara said.

The technology to be used in the trial is broadly similar to that of carbon capture and storage systems, or CCS, for reducing emissions blamed for global warming, Fujiwara said. CCS allows carbon dioxide produced by power plants to be stored underground or below the seabed.

The Yabase field could hold up to 6 million tons of carbon, he said.

Reducing Emissions

Japan emitted 1.3 billion tons of carbon in the year ended March 2007, according to the environment ministry, 6.2 percent more than the 1990 level. The country has pledged to cut emissions by 6 percent from the 1990 level by 2012 under the 1997 Kyoto Protocol on climate change.

Inpex's unit produces 40 kiloliters, or 252 barrels a day, of crude oil at the Yabase field. Output peaked at 600 kiloliters in the early 1950s, Maeda said. That's equivalent to 14 percent of Japan's crude imports in 1950, according to data compiled by the trade ministry.

Cumulative oil production reached 5.6 million kiloliters as of March 2007, the most from a Japanese field, according to the Japan Natural Gas Association.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.