Analyst: Gas shale may be next bubble to burst

DENVER — The promise of enough natural gas to last the United States more than 100 years based on discoveries of vast shale formations could be the country’s next speculative bubble to burst, a speaker warned Monday at a conference exploring the notion that the world’s oil and gas are diminishing rapidly.

Arthur Berman, a Texas-based geological consultant, likened the optimistic projections for production from gas shale fields across the country to banks buying into mortgage securitizations, which spurred the housing market crisis and economic meltdown.

“In the midst of a boom or a bubble, it’s hard to sit on the sidelines,” Berman said during the Association for the Study of Peak Oil and Gas conference. “If you’re not in one of these plays, then Wall Street says, ‘Well, what’s the matter with you guys?’”

That was the psychology leading into the current financial crunch, Berman said. Analyses show that gas shale fields in Texas and elsewhere aren’t as profitable and likely don’t contain as much retrievable gas as the industry and others portray, he added.

Based on the experience in the Barnett Shale in Texas, Berman said he doesn’t expect the yields from the wells to be high enough or last long enough to make the gas shales that profitable, even when current low gas prices rise.

His view contrasts with that of other analysts and the industry who see natural gas as playing a key role in the face of concerns about declining oil supplies and climate change. The Potential Gas Committee at the Colorado School of Mines in Golden said in June that the U.S. natural gas reserves total nearly 2,000 trillion cubic feet, up about 35 percent from 2006 estimates and mostly due to such unconventional gas fields as shale and the Rockies’ sandstone formations.

Peter Dea, chief executive of Denver-based Cirque Resources, said the abundance of natural gas “truly is an American treasure.” He called the vast layers of rock containing gas in Texas, the Northeast and elsewhere game-changers.

“It really gives us surety of this 100-plus-year supply that we now have in America,” Dea said.

New technology and hydraulic fracturing — injecting liquids, sands and chemicals underground to open pathways for gas — have increased the efficiency and decreased production costs, Dea said. Natural gas, he added, has the potential to replace coal as the country’s main source of electricity and fuel the nation’s vehicles.

Natural gas is “truly a win-win-win” for the economy, environment and national security, because it’s a domestic energy source, Dea said. Natural gas is 60 percent to 75 percent cleaner than coal, he said.

Energy analyst Randy Udall said after the panel discussion that the peak-oil group, which he co-founded, is studying the implications of discovery of the gas shales.

“The increase in production would suggest that natural gas will play a larger role in the future,” Udall said.

But to boost the role of gas to the levels promoted by Dea and others would require a significant increase in development, Udall said. The U.S. gas production peaked 35 years ago, Udall said, and the roughly 10 percent jump in production over the last four years required doubling the drilling rate.

“It would have big impacts on the Rocky Mountain West,” Udall said.

Subscribers of the peak oil theory believe the world is at or near its maximum oil production and that demand will soon eclipse supply levels. Most of the big oil companies disagree and point to the federal Energy Information Administration’s projection that the world’s oil production peak could be as far as 40 years away.

The peak oil conference runs through Tuesday.

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