Yeah, but what does he know

Legendary energy investor says the shale gas cornucopia is basically all misplaced optimism:

Because, he contends, shale gas – the previously unattainable source of vast gas supplies that has been unlocked by new high-tech horizontal drilling advancements – is not the holy grail it's been cracked up to be. Not even close.

“Everyone thinks [shale gas] is going to solve all of our problems. There are very optimistic estimates about the economically recoverable volumes of gas from this new resource,” he said in an interview last week in the Toronto offices of boutique fund manager Middlefield Capital Corp., where he's a long-time consultant and is special adviser to the nine-month-old Middlefield Groppe Tactical Energy mutual fund.

“That's dominating everyone's views about the gas supply picture – that we're going to be flooded with gas.”

The reality, he argues, is that shale gas deposits are a tiny part of the North American production pool – and they are already depleting fast.

Mr. Groppe says that while the average depletion rate in conventional gas wells is about 25 per cent (in other words, if you didn't drill at all for new wells, production would decline by a quarter each year), shale gas shows even more rapid depletion – output tumbles, on average, 45 per cent in the first year for shale wells.

So, we're looking at heading back to natural gas scarcity in the near future, at the same time as oil scarcity gets worse. Wheee.