Shale - The Last Oil And Gas Train: Interview With Arthur Berman

Tyler Durden's picture

Submitted by James Stafford via,

How much faith can we put in our ability to decipher all the numbers out there telling us the US is closing in on its cornering of the global oil market? There’s another side to the story of the relentless US shale boom, one that says that some of the numbers are misunderstood, while others are simply preposterous. The truth of the matter is that the industry has to make such a big deal out of shale because it’s all that’s left. There are some good things happening behind the fairy tale numbers, though—it’s just a matter of deciphering them from a sober perspective.   

In a second exclusive interview with James Stafford of, energy expert Arthur Berman discusses:

  • Why US gas supply growth rests solely on Marcellus
  • When Bakken and Eagle Ford will peak
  • The eyebrow-raising predictions for the Permian Basin
  • Why outrageous claims should have oil lawyers running for cover
  • Why everyone’s making such a big deal about shale
  • The only way to make the shale gas boom sustainable
  • Why some analysts need their math examined
  • Why it’s not just about how much gas we produce
  • Why investors are starting to ask questions
  • Why new industries, not technologies will make the next boom
  • Why we’ll never hit the oil and gas ‘wall’
  • Why companies could use a little supply-and-demand discipline
  • Why ‘fire ice’ makes sense (in Japan)
  • Why the US crude export debate will be ‘silly’

Arthur is a geological consultant with thirty-four years of experience in petroleum exploration and production. He is currently consulting for several E&P companies and capital groups in the energy sector. He frequently gives keynote addresses for investment conferences and is interviewed about energy topics on television, radio, and national print and web publications including CNBC, CNN, Platt’s Energy Week, BNN, Bloomberg, Platt’s, Financial Times, and New York Times. You can find out more about Arthur by visiting his website: Almost on a daily basis we have figures thrown at us to demonstrate how the shale boom is only getting started. Mostly recently, there are statements to the effect that Texas shale formations will produce up to one-third of the global oil supply over the next 10 years. Is there another story behind these figures?

Arthur Berman: First, we have to distinguish between shale gas and liquids plays. On the gas side, all shale gas plays except the Marcellus are in decline or flat. The growth of US supply rests solely on the Marcellus and it is unlikely that its growth can continue at present rates. On the oil side, the Bakken has a considerable commercial area that is perhaps only one-third developed so we see Bakken production continuing for several years before peaking. The Eagle Ford also has significant commercial area but is showing signs that production may be flattening. Nevertheless, we see 5 or so more years of continuing Eagle Ford production activity before peaking. The EIA has is about right for the liquids plays--slower increases until later in the decade, and then decline.

The idea that Texas shales will produce one-third of global oil supply is preposterous. The Eagle Ford and the Bakken comprise 80% of all the US liquids growth. The Permian basin has notable oil reserves left but mostly from very small accumulations and low-rate wells. EOG CEO Bill Thomas said the same thing about 10 days ago on EOG's earnings call. There have been some truly outrageous claims made by some executives about the Permian basin in recent months that I suspect have their general counsels looking for a defibrillator.

Recently, the CEO of a major oil company told The Houston Chronicle that the shale revolution is only in the "first inning of a nine-inning game”. I guess he must have lost track of the score while waiting in line for hot dogs because production growth in U.S. shale gas plays excluding the Marcellus is approaching zero; growth in the Bakken and Eagle Ford has fallen from 33% in mid-2011 to 7% in late 2013.

Oil companies have to make a big deal about shale plays because that is all that is left in the world. Let's face it: these are truly awful reservoir rocks and that is why we waited until all more attractive opportunities were exhausted before developing them. It is completely unreasonable to expect better performance from bad reservoirs than from better reservoirs.

The majors have shown that they cannot replace reserves. They talk about return on capital employed (ROCE) these days instead of reserve replacement and production growth because there is nothing to talk about there. Shale plays are part of the ROCE story--shale wells can be drilled and brought on production fairly quickly and this masks or smoothes out the non-productive capital languishing in big projects around the world like Kashagan and Gorgon, which are going sideways whilst eating up billions of dollars.

None of this is meant to be negative. I'm all for shale plays but let's be honest about things, after all!  Production from shale is not a revolution; it’s a retirement party.

OP: Is the shale “boom” sustainable?

Arthur Berman: The shale gas boom is not sustainable except at higher gas prices in the US. There is lots of gas--just not that much that is commercial at current prices. Analysts that say there are trillions of cubic feet of commercial gas at $4 need their cost assumptions audited. If they are not counting overhead (G&A) and many operating costs, then of course things look good. If Walmart were evaluated solely on the difference between wholesale and retail prices, they would look fantastic. But they need stores, employees, gas and electricity, advertising and distribution. So do gas producers. I don't know where these guys get their reserves either, but that needs to be audited as well.

There was a report recently that said large areas of the Barnett Shale are commercial at $4 gas prices and that the play will continue to produce lots of gas for decades. Some people get so intrigued with how much gas has been produced and could be in the future, that they don't seem to understand that this is a business. A business must be commercial to be successful over the long term, although many public companies in the US seem to challenge that concept.

Investors have tolerated a lot of cheerleading about shale gas over the years, but I don't think this is going to last. Investors are starting to ask questions, such as: Where are the earnings and the free cash flow. Shale companies are spending a lot more than they are earning, and that has not changed. They are claiming all sorts of efficiency gains on the drilling side that has distracted inquiring investors for awhile. I was looking through some investor presentations from 2007 and 2008 and the same companies were making the same efficiency claims then as they are now. The problem is that these impressive gains never show up in the balance sheets, so I guess they must not be very important after all.

The reason that the shale gas boom is not sustainable at current prices is that shale gas is not the whole story. Conventional gas accounts for almost 60% of US gas and it is declining at about 20% per year and no one is drilling more wells in these plays. The unconventional gas plays decline at more than 30% each year. Taken together, the US needs to replace 19 billion cubic feet per day each year to maintain production at flat levels. That's almost four Barnett shale plays at full production each year! So you can see how hard it will be to sustain gas production. Then there are all the efforts to use it up faster--natural gas vehicles, exports to Mexico, LNG exports, closing coal and nuclear plants--so it only gets harder.

This winter, things have begun to unravel. Comparative gas storage inventories are near their 2003 low. Sure, weather is the main factor but that's always the case. The simple truth is that supply has not been able to adequately meet winter demand this year, period. Say what you will about why but it's a fact that is inconsistent with the fairy tales we continue to hear about cheap, abundant gas forever.

I sat across the table from industry experts just a year ago or so who were adamant that natural gas prices would never get above $4 again. Prices have been above $4 for almost three months. Maybe "never" has a different meaning for those people that doesn't include when they are wrong.

OP: Do you foresee any new technology on the shelf in the next 10-20 years that would shape another boom, whether it be fossil fuels or renewables?

Arthur Berman: I get asked about new technology that could make things different all the time. I'm a technology enthusiast but I see the big breakthroughs in new industries, not old extractive businesses like oil and gas. Technology has made many things possible in my lifetime including shale and deep-water production, but it hasn't made these things cheaper.

That's my whole point about shale plays--they're expensive and need high oil and gas prices to work. We've got the high prices for oil and the oil plays are fine; we don't have high prices for the gas plays and they aren't working. There are some areas of the Marcellus that actually work at $4 gas price and that's great, but it really takes $6 gas prices before things open up even there.

OP: In Europe, where do you see the most potential for shale gas exploitation, with Ukraine engulfed in political chaos, companies withdrawing from Poland, and a flurry of shale activity in the UK?

Arthur Berman: Shale plays will eventually spread to Europe but it will take a longer time than it did in North America. The biggest reason is the lack of private mineral ownership in most of Europe so there is no incentive for local people to get on board. In fact, there are only the negative factors of industrial development for them to look forward to with no pay check. It's also a lot more expensive to drill and produce gas in Europe.

There are a few promising shale plays on the international horizon:  the Bazherov in Russia, the Vaca Muerte in Argentina and the Duvernay in Canada look best to me because they are liquid-prone and in countries where acceptable fiscal terms and necessary infrastructure are feasible.  At the same time, we have learned that not all plays work even though they look good on paper, and that the potentially commercial areas are always quite small compared to the total resource.  Also, we know that these plays do not last forever and that once the drilling treadmill starts, it never ends.  Because of high decline rates, new wells must constantly be drilled to maintain production.  Shale plays will last years, not decades.

Recent developments in Poland demonstrate some of the problems with international shale plays.  Everyone got excited a few years ago because resource estimates were enormous.  Later, these estimates were cut but many companies moved forward and wells have been drilled.  Most international companies have abandoned the project including ExxonMobil, ENI, Marathon and Talisman.  Some players exited because they don’t think that the geology is right but the government has created many regulatory obstacles that have caused a lack of confidence in the fiscal environment in Poland.

The UK could really use the gas from the Bowland Shale and, while it's not a huge play, there is enough there to make a difference. I expect there will be plenty of opposition because people in the UK are very sensitive about the environment and there is just no way to hide the fact that shale development has a big footprint despite pad drilling and industry efforts to make it less invasive.

Let me say a few things about resource estimates while we are on the subject.  The public and politicians do not understand the difference between resources and reserves.  The only think that they have in common is that they both begin with “res.”  Reserves are a tiny subset of resources that can be produced commercially.  Both are always wrong but resource estimates can be hugely misleading because they are guesses and have nothing to do with economics.  

Someone recently sent me a new report by the CSIS that said U.S. shale gas resource estimates are too conservative and are much larger than previously believed.  I wrote him back that I think that resource estimates for U.S. shale gas plays are irrelevant because now we have robust production data to work with.  Most of those enormous resources are in plays that we already know are not going to be economic.  Resource estimates have become part of the shale gas cheerleading squad’s standard tricks to drum up enthusiasm for plays that clearly don’t work except at higher gas prices.  It’s really unfortunate when supposedly objective policy organizations and research groups get in on the hype in order to attract funding for their work.

OP: The ban on most US crude exports in place since the Arab oil embargo of 1973 is now being challenged by lobbyists, with media opining that this could be the biggest energy debate of the year in the US. How do you foresee this debate shaping up by the end of this year?

Arthur Berman: The debate over oil and gas exports will be silly.

I do not favor regulation of either oil or gas exports from the US. On the other hand, I think that a little discipline by the E&P companies might be in order so they don't have to beg the American people to bail them out of the over-production mess that they have created knowingly for themselves. Any business that over-produces whatever it makes has to live with lower prices. Why should oil and gas producers get a pass from the free-market laws of supply and demand?

I expect that by the time all the construction is completed to allow gas export, the domestic price will be high enough not to bother. It amazes me that the geniuses behind gas export assume that the business conditions that resulted in a price benefit overseas will remain static until they finish building export facilities, and that the competition will simply stand by when the awesome Americans bring gas to their markets. Just last week, Ken Medlock described how some schemes to send gas to Asia may find that there will be a lot of price competition in the future because a lot of gas has been discovered elsewhere in the world.

The US acts like we are some kind of natural gas superstar because of shale gas. Has anyone looked at how the US stacks up next to Russia, Iran and Qatar for natural gas reserves?

Whatever outcome results from the debate over petroleum exports, it will result in higher prices for American consumers. There are experts who argue that it won't increase prices much and that the economic benefits will outweigh higher costs. That may be but I doubt that anyone knows for sure. Everyone agrees that oil and gas will cost more if we allow exports.

OP: Is the US indeed close to hitting the “crude wall”—the point at which production could slow due to infrastructure and regulatory restraints?

Arthur Berman: No matter how much or little regulation there is, people will always argue that it is still either too much or too little. We have one of the most unfriendly administrations toward oil and gas ever and yet production has boomed. I already said that I oppose most regulation so you know where I stand. That said, once a bureaucracy is started, it seldom gets smaller or weaker. I don't see any walls out there, just uncomfortable price increases because of unnecessary regulations.

We use and need too much oil and gas to hit a wall. I see most of the focus on health care regulation for now. If there is no success at modifying the most objectionable parts of the Affordable Care Act, I don't suppose there is much hope for fewer oil and gas regulations. The petroleum business isn't exactly the darling of the people.

OP: What is the realistic future of methane hydrates, or “fire ice”, particularly with regard to Japanese efforts at extraction?

Arthur Berman: Japan is desperate for energy especially since they cut back their nuclear program so maybe hydrates make some sense at least as a science project for them. Their pilot is in thousands of feet of water about 30 miles offshore so it's going to be very expensive no matter how successful it is.

OP: Globally, where should we look for the next potential “shale boom” from a geological perspective as well as a commercial viability perspective?

Arthur Berman: Not all shale is equal or appropriate for oil and gas development. Once we remove all the shale that is not at or somewhat above peak oil generation today, most of it goes away. Some shale plays that meet these and other criteria didn't work so we have a lot to learn. But shale development is both inevitable and necessary. It will take a longer time than many believe outside of North America.

OP: We’ve spoken about Japan’s nuclear energy crossroads before, and now we see that issue climaxing, with the country’s nuclear future taking center-stage in an election period. Do you still believe it is too early for Japan to pull the plug on nuclear energy entirely?

Arthur Berman: Japan and Germany have made certain decisions about nuclear energy that I find remarkable but I don't live there and, obviously, don't think like them.

More generally, environmental enthusiasts simply don't see the obstacles to short-term conversion of a fossil fuel economy to one based on renewable energy. I don't see that there is a rational basis for dialogue in this arena. I'm all in favor of renewable energy but I don't see going from a few percent of our primary energy consumption to even 20% in less than a few decades no matter how much we may want to.

OP: What have we learned over the past year about Japan’s alternatives to nuclear energy?

Arthur Berman: We have learned that it takes a lot of coal to replace nuclear energy when countries like Japan and Germany made bold decisions to close nuclear capacity. We also learned that energy got very expensive in a hurry. I say that we learned. I mean that the past year confirmed what many of us anticipated.

OP: Back in the US, we have closely followed the blowback from the Environmental Protection Agency’s (EPA) proposed new carbon emissions standards for power plants, which would make it impossible for new coal-fired plants to be built without the implementation of carbon capture and sequestration technology, or “clean-coal” tech. Is this a feasible strategy in your opinion?

Arthur Berman: I'm not an expert on clean coal technology either but I am confident that almost anything is possible if cost doesn't matter. This is as true about carbon capture from coal as it is about shale gas production. Energy is an incredibly complex topic and decisions are being made by bureaucrats and politicians with little background in energy or the energy business. I don't see any possibility of a good outcome under these circumstances.

OP: Is CCS far enough along to serve as a sound basis for a national climate change policy?

Arthur Berman: Climate-change activism is a train that has left the station. If you’ve missed it, too bad. If you're on board, good luck.

The good news is that the US does not have an energy policy and is equally unlikely to get a climate change policy for all of the same reasons. I fear putting climate change policy in the hands of bureaucrats and politicians more than I fear climate change (which I fear).

See our previous interview with Arthur Berman.


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Soul Glow's picture

Peak oil, bitchez.

Soul Glow's picture

The oil is in the ground, it is just getting deeper and deeper and harder to get to.  Technology can increase, but at what rate?  We are failing to get deep sea rigs going like the corporations had imagined a decade ago - the GOM Oil Spill is the perfect testiment for that.

Shale and tar sands can only do so much to keep the easy oil economy going.  The benefit, when thought to add environmental consiquences, is low.  Tap the Rockies?  Tap California?  People know that fracking destroys fresh water tables and why would they do it to Colorado?  They supply a lot of fresh water to Americans.  And California fresh produce and cattle and dairy.  Why mess up the water to these areas?

Economic costs aside it is still not highly sustainable to get the amount of oil out to stop being energy dependand on foreign oil.  Trade of oil will continue to be in the import column for the United States .  

CrashisOptimistic's picture

"The oil is in the ground, it is just getting deeper and deeper and harder to get to."

Your phrasing has a crushing problem.

Oil doesn't exist deeper and deeper and deeper.  "Harder to get to" isn't an issue of deeper.  Deeper is hotter.  Hotter turns oil into natural gas.  The carbon chains break down under millions of years of heat and become CH4, natural gas, the simplest hydrocarbon form.

The available places to find oil is not just lateral geography.  There is a depth limit too.

The issue of "harder to get to" is an issue of . . . view it as bubble size.  The size of the reservoirs (there's not liquid down there, it is porous rock, so we're talking about bubbles of porosity) get smaller and smaller.  Drilling to a bubble the size of a Coke can with a $10 million well is never going to happen unless that Coke can sized bubble prices above $10 million.

THAT is why there is "lots of oil" and "it's never going to run out".  The Coke can volumes are never going to be tapped.  They are there and will be there forever.  We'll never "run out."


National Blessing's picture

We aren't running out of oil and gas.  We'll all be dead from an extinction event before that happens.  Bitches.

Soul Glow's picture

Crashisoptimistic - 

My point is the light sweet crude is harder to find and capture and all that we are left with is NG, shale, and tar sands, and the return for the investment is not as high for those as for light sweet crude.  We have picked the low hanging fruit, if you will.

CrashisOptimistic's picture

Ya, that is better metaphorical phrasing.

thatthingcanfly's picture


When you wrote, "People know" fracking hurts the water table, you should have written "People think." There is a lot of misinformation out there regarding this topic.

Frack wells are encased a double-concrete/steel case that extends several hundred feet, well below the aquifer, before continuing down into the thousands of feet of depth necessary to reach the shale deposit, before the well turns horizontal. All fracking water/sand/lubricity agents are recovered and, in most cases that I know of, reused.

This will not stop the Eco-nuts from opposing fracking in the more left-wing U.S. States, and your point there is well taken. But it's predicated on a myth.

Tree of Liberty's picture

Please remember that the double cased well you are describing only extends into the opening of the formation and does not protect nor prevent the separate distinquishable water and petroleum layers which often become one due to high pressure fracturing.  This is how natural gas ends up in water aquifers during and after this process is performed.  There is also also volumes of data indicating increased seismic activity along these formation where fracturing occurs, so please do your due diligence on the pros and cons of fracturing which now almost always includes directional drilling.   Fracturing using water and other petroleum solvents is designed to extract previously trapped oil and gas formations and does little to protect cross formation and water aquifer contamination. 

thatthingcanfly's picture

Please explain how you believe hydrocarbons from 4000-10000 feet deep penetrate upward to depths more shallow than 300 feet to contaminate the water aquifer, so much so that "the water and petroleum layers... become one." This strikes me as as absurd.

None of this has much to do with micro-tremors, which probably are related to fracking, but which are of little concern.

Also please refrain from the passive-aggressive comments about my "due diligence." You may think this makes you look clever; but this is how uneducated people talk when they want to be taken seriously by educated people - and educated people know it. Knock it off.

still kicking's picture

I logged in just to upvote that

Flakmeister's picture

Casing failure rates  are much higher than you would have people believe...

thatthingcanfly's picture

No, they're not.

If that were a problem with even one well, the producer would immediately fix it, and put in place corrective actions for future wells to prevent its recurrence, as case leakage would mean they were losing hydrocarbons that they spent a lot of money trying to get out of the shale. One of those instances where the company's financial best interest is also in line with an environmental concern.

Flakmeister's picture

But the Bakken is the quintessential light sweet crude...

It is all about the ability of the economy to support the price required for the marginal barrel of new production...

CrashisOptimistic's picture

BTW Tylers, I hammered over the weekend in another comment no one cares about nor should care about.

This Berman interview has been making the rounds for some time elsewhere.  I'm not sure this is an original source.  It may be, and if so I'll give oilprice a nod as one useful thing out of 10 and eat a feather of the crow.

The Wedge's picture

"Oil doesn't exist deeper and deeper and deeper.  "Harder to get to" isn't an issue of deeper.  Deeper is hotter.  Hotter turns oil into natural gas.  The carbon chains break down under millions of years of heat and become CH4, natural gas, the simplest hydrocarbon form".

"The available places to find oil is not just lateral geography.  There is a depth limit too".

Geologists call it the hydrocarbon "kitchen". Or the window. Excellent post.


aVileRat's picture


However, deeper does not mean the marginal cost per barrel will increase to the same degree as the cost scale jumped from when we went from chasing big elephants in the North Sea & Gawar analogs to tight plays. What comes after the tight plays and the use of new software packages, that is where we will go next.

What was once the coke can volume 10 years ago, is now possible due to various in the field prototype developments. Not all fields are simple "Frack & play" projects, and note: frac control is a 24 year old tech. Nowhere near the bleeding edge of New Ventures right now.

But then again, this peak story has been told 4 times now, as per the old Zero Hedge Idiom, maybe this time is different.

2 words: Sub Salt.

want two more words? Blind halo's.

For a context of scope, we have only mapped about 20% of all onshore land mass, most of it was due to mega-seismic programs launched in the desperation of the post-war fuel squeeze. Large swathes of the US, and even greater extents of Russia, Africa and the offshore foreland basin's are largely unmapped sans 1 seismic shot per 10,000 KM squared. Think about that for a moment.

The bigger question for our generation will be what will become of the petro-states who lack the mechanical acumen to manage their old fields in the same way Communist regimes fell behind & lost their tooling ability after nationalizing their industrial bases.

We have already began to see the first of the nationalista's fields start to collapse in Russia & Venez. China's failures to develop their hydrocarbon geography has already led to the desperate breakup plan for CNPC. It will more fun from here on out.

Stuck on Zero's picture

There is lots of deep oil below 25-30,000 feet.  Russia is producing most of its oil from these depths.  The oil comes up at 150-250 Celsius and has a strange consistency.  The problem is that every deep drilling operation is a billion dollars or more and scary.  We saw what happened to BP in the Gulf.  This isn't an area for little wildcat operations.  It takes one of the handful of majors.  A petro-geologist firend of mine said the Gulf has enough deep oil to supply the U.S. for 100 years but there has to be a will to get at it.


Manthong's picture

The USSA can only get on top of that part of the food chain after the great reset, everyone is in economic chains and the price of oil goes through the roof.


..and the only way Ukraine gets gas cheaper or more preferable than from Russia is if you subsidize it.

Soul Glow's picture

They just took over the Cremia from Ukraine.  That's a bold to the top move.

Manthong's picture

Khrushchev was a Ukrainian.. he gave Crimea to Ukraine for administrative control in 1954.

That would never have happened if they had any idea the USSR would fall apart.

Crimea is ethnically and historically Russian since they took it from the Tartars a few hundred years ago.


Just sayin’.

The Wedge's picture

"People know that fracking destroys fresh water tables and why would they do it to Colorado"?

Got a source for this claim other than misleading documentaries?

Soul Glow's picture

Anytime you mine or drill you hurt the ecology of the place it is being done.  In order to get gas out of the Rockies you would be mining the headwaters of the biggest mountain ecosystem in the United States.

All you need is common sense to know that mining hurts the ecosystems.

The Wedge's picture

You specifically claimed fracking damages water tables. You gave no source for your claim. Now you are claiming anytime you mine or drill you hurt the ecology of the area. Could you explain how that happens in all cases?

"In order to get gas out of the Rockies you would be mining the headwaters of the biggest mountain ecosystem in the United States".

We are not talking about mining. We are talking about fracking. As pointed out in another reply to one of your posts, oil and gas, including shale, are at very specific depths. Too deep, the hydrocarbon molecules break down and become gas. All this takes place far below the water table. This is geologic fact not some movie. Movies always portray any extraction of resources as devastating and it's just not always the case. Technology in the fossil fuel industry has been phenomenal and largely driven by pressure, rightly so, to leave a smaller foot print. But just the fact that humans exist damages natural ecology's. I don't think we should go crazy drilling etc. but I don't think we should make energy policy based on movies and group think. We have to have fossil fuels. It will take many years to break through the barriers to renewable energy. The laws of thermal dynamics are hard to overcome. And in the interim, we must have a wise, reasoned energy policy.


thatthingcanfly's picture


Exactly. I thought I was the only one here who knew the "fracking hurts the aquifer" sound byte was myth. Apparently, Matt Damon is one convincing mo-fo.

Edit: It's "thermodynamics," not "thermal dynamics."

Tree of Liberty's picture

Wedge, if you understand how the technique and process works....then it becomes elementary why the later occurs (cross contamination of petroleum formations into water aquifers).  Water is the most valuable commodity now, why risk the contamination as you cannot clean it easily once it is done.  And spare me all the corporate paid propaganda reports that indicate it is safe.  I worked for these guys and I know how they throw money at a PR campaign until public oppinion (ie ignorant people incapable of rational thought) turns into their favor.

How many examples do we need to know that safety does not drive this technology; greed and hubaris of man does.   Bopal, Exxon Valdez, Deep horizon, Piper Alpha, Texas City catastrophes.  And in all instances they were telling everyone involved it is safe and we are in control.....Hubaris it is dangerous but not as dangerous when mixed with greed.


thatthingcanfly's picture

It's "hubris."

There is no evidence that hydrocarbons are penetrating into water aquifers as a result of fracking (Matt Damon to the contrary notwithstanding). The suggestion, once one understands the geology, is absurd on its face.

The E&Ps are heavily regulated by the States; if there were serious safety concerns here, these would have been all over headline news by now, and the practice would have been stopped (or modified to eliminate the safety issues) years ago.

If you "worked for these guys" and were in a position to know how "they throw money at... PR campaign[s]," then it follows you were an accountant, or worked in a corporate office space. In which case you may be forgiven for lack of familiarity with the particulars of geology pertinent to the business. Even if this is not so, it does not follow logically that an E&P is guilty of sacrificing safety and/or contaminating the water table just because it advertises its business, for Pete's sake.

Does anybody study logic anymore?

0b1knob's picture

"they need stores, employees, gas and electricity, advertising and distribution. So do gas producers."

Say what?   Gas producers don't have stores, they don't advertise and distribution is handled by pipeline companies.   They don't need gas (gasoline I think you mean) and employee count can be very minimal if drilling is outsourced as it frequently is. 


One Canadian company I am familiar with (Peyto) produces something like $500 million worth of nat gas per year with less than 100 employees.

Kirk2NCC1701's picture

Cue the Drill & Shill cheerleaders.

Got financial Pom-Poms and a story with 'Legs'?  ;-)

Major Major Major's picture

"There are some areas of the Marcellus that actually work at $4 gas price and that's great, but it really takes $6 gas prices before things open up even there."


So, the only nat gas is gonna come from the Marcellus but they will only really drill with a $6 gas price...


Kina dificult to get permits to drill in some of the good areas too.


Protokletos's picture

Additionally, there's no infrastructure to support a lot of the gas being produced in some areas.  For example, check out the Leidy spreads from July-Sep 13...this is almost entirely caused by a glut in the area and no way to get the gas to market.

yogibear's picture

" There is lots of gas--just not that much that is commercial at current prices. "


The US wants to export so it means much higher prices. It's coming. It's just a matter of time before we see $6/gal gasoline.

El Vaquero's picture

And watch the economy come grinding to a halt as consumers cannot afford to drive to the mall. 

Major Major Major's picture

Not without giving up at least a kidney!

cougar_w's picture

Nobody gets this.

"$6 gas is coming. I'm going to hate it. Damned those hippies."

The fuck ya say? Hate it, but still buy it? No you won't, you won't have the money. And that's why gasoline will never reach $6/gal ever. Instead it will knock around $4/gal for a while as storage and inventories go to zero because the producers cannot get the price they need to refine that shit so they just stop refining it. And what -- Obama is going to go to Richmond and say "you start right back refining that shit niggaz". Hell no. I would even pay an admission fee to be there and hear him say it but there is no way it will ever happen, and that will be the mu'fucking end of that.

Nobody is going to bail this sinking ship out by themselves. And so it is going to sink. And it's going to sink all at once. There will be oil in the ground but nobody will want to be the loser taking a loss on producing it. Fact.

samsara's picture

Standing and clapping on that one Cougar.

Johnny Cocknballs's picture

a nice ME war, a hot summer...  I hope your right, but I think close to 6 is entirely possible.

Plus, 6 bucks ain't what it used to be.

SF beatnik's picture

Sounds about right except for the price point.


I'd go much higher than $6. 


Ask yourself how much you would pay for gas to drive to the football game or favorite restaurant.

Citxmech's picture

Don't forget that every extra dollar that goes to fuel comes out of other spending.  In other words, the higher gas/food/etc. goes, the fewer jobs in our consumer economy.  This is going to be a viscious circle that gets tighter and tighter.  Hedge accordingly.

Tree of Liberty's picture

You are only looking at this in one diimension; supply and demand.   It will go beyond 6$ a gallon as we have to things happening destruction of our currency system and scarcity of a real asset that cant be printed and yes refiners will not refine products at a loss!

Tree of Liberty's picture

You are only looking at this in one diimension; supply and demand.   It will go beyond 6$ a gallon as we have to things happening destruction of our currency system and scarcity of a real asset that cant be printed and yes refiners will not refine products at a loss!

TheFourthStooge-ing's picture

yogibear, you're getting your picnic baskets mixed up a little.

From TFA:

" There is lots of gas--just not that much that is commercial at current prices. "

That is referring to natural gas, not gasoline (petrol). In the discussion regarding the commercial amount available at $4 compared to $6, the price is per million BTU (MMBTU).

Kirk2NCC1701's picture

I can see where this train is headed:  As the production levels, but the inherent demand for Debt-Dollars MUST grow, you don't need a PhD in Math, to realize that prices have only ONE way to go:  Up.  Way UP!

Hedge and plan accordingly, cause most people are gullible and suck at math, and most shills bank on it.

yogibear's picture

With the Federal Reserve devaluing the US dollar  gasoline prices are set to go higher than $6.00/gallon.

Soul Glow's picture

And shale isn't light sweet crude - the return on the margin isn't as high, because cost is higher price will be set higher to capture a prime margin.

NOTaREALmerican's picture

Interesting article.

tempo's picture

fracking is only booming because "W" exempted from the clean water act/ePA and is regulated by States. Obama would kill fracking if he could. He takes credit for the benefits but its all "W".

cougar_w's picture

Obama is scared spitless over what happens the day the gas inventories hit zero.

That's the interesting story. Almost nobody can afford to produce at the current prices (too low) and nobody has the money to pay a price that conforms with production costs (too high).

Someone has to fold. When they do then we'll know what happens to us.

BurningFuld's picture

Well we seem to be flush around here:

A new federal-provincial study has concluded that naturas gas reserves contained in the Montney Formation that straddes British Columbia and Alberta are more than double than previously estimated, equivalent to 145 years of supply at Canada's current consumption levels.

TheFourthStooge-ing's picture

Canada's current consumption levels? That sounds like an intentionally deceptive measurement considering the amount of natural gas that the US imports from Canada.