Thursday, February 25, 2010

Berman Is Back

Those investors that dabble in the Energy Sector are probably familiar with Arthur Berman, who runs a blog called the Petroleum Truth Report, and has staked his reputation on a bearish point of view on the shale gas resources that are believed by many to be the greatest thing since sliced bread.

Berman comes with impeccable credentials which lends an air of respectability to his writings. He is a Petroleum Geologist that worked for a major oil company for most of his career.

His latest piece was published on the Oil Drum, and I recommend that everyone read it, not because I necessarily agree with everything that he writes, but investors shouldn't fear an opposite opinion.

Here are some provocative excerpts from the post:

"The widespread belief that there is 100 years of natural gas supply in the U.S. because of shale plays is incorrect. Claims that shale gas has resulted in 100 years of supply are based on circular references without underlying documentation, and also do not take high decline rates or anticipated future demand growth into account."

"The current marginal cost of gas production is at least $8/Mcf, and prices will eventually rise to meet that cost."

"The Barnett Shale play is largely non-commercial because the controls on production are complex and difficult to predict."

Read the comments below the post as Berman makes substantial comments in response to readers questions.

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