Tulsa World: Shale gas skeptic draws companies' wrath

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Shale gas skeptic draws companies' wrath
OKC energy companies fire back at a Texas geologist.

By EDWARD KLUMP & JIM POLSON Bloomberg News
Published: 11/18/2009 2:23 AM
Last Modified: 11/18/2009 9:45 AM

A Texas oil geologist has drawn sharp criticism from the industry after producing research that says forecasts for U.S. natural gas production are far too optimistic.

Arthur Berman, who runs a one-man energy consulting firm out of his home near Houston, has been attacked in the last month by Chesapeake Energy Corp. and Devon Energy Corp., two Oklahoma City-based gas producers that are among the nation's largest.

Berman had his monthly column pulled from the November issue of World Oil after gas companies complained, prompting him to quit the trade journal.

A consultant who also worked two decades for Amoco Corp., Berman says companies' production projections for "shale gas" in the U.S. are at least double what drilling results justify. At issue are the rates of production decline in shale wells, where water, sand and other materials are injected to fracture rock and make gas flow.

"I think that the wells decline at a much higher rate than the operators think they do," Berman said in an interview. "They're being overly optimistic."

Companies such as Chesapeake say their shale wells will produce for four or more decades. But in an Oct. 12 speech at a conference in Denver, Berman said data he has seen filed with the Texas Railroad Commission suggests the life of shale gas wells is 10 to 20 years.

"There's a huge vested interest in the status quo because if these wells do not work, there's going to be hell to pay," said John E. Olson, who manages $50 million at Houston Energy Partners.

Olson left his analyst job at Merrill Lynch & Co. in 1998 after being told he was too critical of Enron Corp., which collapsed amid scandal in 2001.

Questions about Berman's research were so frequent that investment bank Tudor Pickering Holt & Co. in Houston put out an e-mail to clients rejecting claims by shale skeptics, said Dave Pursell, a managing director at the firm.

"If you read his stuff, he's basically said there's fraud being committed by Wall Street, E&P companies and reserve engineers all in collusion," Pursell said.

Berman said he's not alleging fraud; rather, he disagrees with how producers are interpreting well data.

Pursell said Berman doesn't have the experience in unconventional gas projects to validate his assertions.

David Hager, exploration chief at Devon Energy, took on Berman's claims with an Oct. 19 op-ed piece in The Oklahoman newspaper. Hager likened shale gas development to a home run to win the World Series and said Berman "is in the stands speculating on whether the slugger is on steroids."

Chesapeake Energy ignored Berman's arguments until it learned of speeches the geologist gave calling shale production a speculative bubble, Chief Operating Officer Steve Dixon said in a telephone interview.

"He called us out," said Dixon, who devoted part of Chesapeake's analyst and investor meeting in New York on Oct. 14 to rebutting Berman. "He left me no choice."

John Royall, CEO of Gulf Publishing Co., pulled Berman's November column from World Oil because of producer complaints, said Perry Fischer, who was fired as the journal's editor on Nov. 5. Fischer said he believes Berman's column contributed to his firing. Royall didn't respond to messages seeking comment.

Berman said he's glad companies and analysts are starting to discuss his shale research.

"I think it's very encouraging that people are disagreeing with me because what that suggests is that we're going to get to an answer eventually," he said. By EDWARD KLUMP & JIM POLSON Bloomberg News

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	Report Comment cobweb, (11/18/2009 10:11:39 AM) In my opinion, Berman is right. These energy guys are smoking dope on their economics.
	Report Comment joker5, (11/18/2009 2:06:04 PM) Berman is right. I know him and I've seen his data.
	Report Comment 007, London (11/18/2009 3:14:57 PM) "There's a huge vested interest in the status quo because if these wells do not work, there's going to be hell to pay," YEP! And this is just the start of it.
	Report Comment woolyboogur, (11/18/2009 7:37:39 PM) Looks like Gestapo tactics to me. I'd have to guess that Berman has found something that CHK and DVN don't want people aka investors to know. And Gulf Publishing should be ashamed of its' actions, what a sorry excuse for being called a publisher. A true publisher would allow the article and get a responce for a debate to get to the truth. Censorship and firing an editor is not a good sign. I hope honest industry will boycott Gulf Publishing.
	Report Comment Bl. Collar, (11/19/2009 7:47:27 AM) I Grew up on a farm with three wells, oil then converted to gas,after about 20 years they started to decline.That was without flooding or injection.Thy are still producing.
	Report Comment r0rschach, (11/19/2009 9:45:49 AM) as long as the industry keeps finding things like Haynesville Berman will be ignored. However it is suspect how fast Chesepeake likes to jump one "next big thing" to another. It was Barnett, then it was Marcellus, now its Haynesville. it does look like an elaborate shell game. I have seen declines in the Barnett that are a lot worse than forecasted. If this is prevalent then CHK is toast.
	Report Comment r0rschach, (11/19/2009 9:47:06 AM) plus when the EPA starts regulating frac fluids the whole industry is fubar'd....only Halliburton's shady lobbies and tactics have prevented that from happening thus far.
	Report Comment Flyover Me, (11/19/2009 12:58:24 PM) Heaven forbid, that CHK and DVN, would actually allow some scientific discussion on the economic projections. It is refreshing that a non-aligned geologist would call out the lofty projections of these energy companies. These shale gas wells may require some new analysis formulas to take a reasonable look at the declination rates. I like the quote from the CHK Development Rep in Pennsylavania, recently, when telling landowners how safe the frac fluids are: paraphrased, "these chemicals are the same household chemicals in your home" Yeah, right, don't know about you guys, but I don't want Drano and Lysol and Bleach mixed with my groundwater in any amounts. What household chemicals might he be talkig about? We don't know. They don't legally have to tell us, thanks to the exclusion from the Safe Drinking Water Act (thanks Bush)
	Report Comment Flyover Me, (11/19/2009 1:01:05 PM) I will say...I'm frequently amazed at how much more in depth and balanced the Tulsa World reporting is, compared to NEWSOK.

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