Shale Gas Overhyped says Petroleum Industry Analyst Henry Groppe
EDIT: (12/23) For an update on the (un)economics of shale gas production go here, and for an update on the NY Dept. of Environmental Protection’s decision to prohibit hydrofracing, announced on 12/22 go here. And for background, go here.
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Henry Groppe – of Groppe Long & Littell is betting that natural gas prices will double by summer. Why? Because like me, he does not buy the shale gas hype, and recognizes that shale gas has entered the seventh fold of production!
But who is Mr. Groppe, and why should we listen to his prognostications? As The Globe and Mail reports:
In 1980, when oil approached $40 a barrel and forecasters predicted $100 oil was inevitable, Mr. Groppe said crude would fall below $15 by the mid-1980s. It did.
In 1998, when crude dipped to barely above $10 and some prognosticators were hailing a new era of cheap energy, Mr. Groppe said oil was set to soar. By early 2000, it had topped $30 a barrel.
And two years ago, when it threatened to reach $150 a barrel and forecasters said $200 and more were just over the horizon, Mr. Groppe predicted we’d be back at $60-$70 in the second half of the year. By October, he was right again.
Now, he says, a slow-but-gradual decline in North American natural gas reserves – regardless of shale – means an average price in the $8 range is inevitable to trigger the “demand destruction” necessary to keep the supply-demand picture in balance. Eventually, he says, that price will creep up toward $10 by the end of the decade, as gas production slowly depletes.
I recommend reading the original article as it gets into some of the (un)economics of shale gas production that I left out of the “Shale Gas is a Giant Loser” post. It sounds like Mr. Groppe has been listening to Art Berman, an independent petroleum geologist, consultant, and (former) columnist for the industry journal World Oil. Mr. Berman has been covering the shale gas story for years. Art recently penned an article titled “Facts are Stubborn Things” which was pulled at the last minute after World Oil received pressure from a top executive at Petrohawk Energy (a major shale gas player). After the article was pulled, Art quit his gig as a columnist, and World Oil editor Perry Fischer was fired. Fortunately, ASPO-USA ran the article – which discusses the (un)economics of shale gas production. Further insight into Art’s arguments are articulated in the presentation (.pdf warning) which he gave at the 2009 ASPO-USA conference.
