Thermal dissociation of hydrated sediment by a pumped hot fluid is modeled. A radial heat flow from the hot pipe is assumed. The coordinate system is cylindrical. Three components (hydrate, methane and water) and three phases (hydrate, gas, and aqueous-phase) are considered in the simulator. The intrinsic kinetics of hydrate formation or dissociation is considered using the Kim-Bishnoi model. Mass transport, including two-phase flow, molecular diffusions and heat transfer involved in formation or dissociation of hydrates are included in the governing equations, which are discretized with finite volume difference method and are solved in an explicit manner. The strength deterioration of the hydrate bed as a result of dissociation is investigated with a geo-mechanical model. The way in which dissociation affects the bed strength is determined by plugging in the porosity and saturation change as a result of dissociation into the sediment collapse equations. A mechanism to measure the pore pressure changes occurring due to dissociation is developed. The rate of collapse as dissociation proceeds is determined and the model thus enables the definition of a safety envelope for gas hydrate drilling.