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Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Shale Gas Going Global – An Interview with Dave Forest

Commodities / Natural Gas Mar 30, 2010 - 11:26 AM GMT

By: Keith_Schaefer

Commodities

Dave Forest and I are philosophically aligned.  Dave writes “Pierce Points” everyday (and I read it every day) and he is a former Casey Energy newsletter editor. We’ve started sharing ideas and a key one for both of us is that we see huge shareholder wealth being created for oil and gas investors as the new technologies now used in North America – horizontal drilling and fracking – get exported around the world.


Of course these technologies are 40 years old, but only in the last decade have they been perfected so they can get oil and gas out of shale rock. 

Being able to make an economic hydrocarbon discovery in rock as opposed to the regular loose sands is about as simple as I can make the opportunity.  It opens up the probability of billions of new barrels of oil to be discovered over the coming decade or two.  Where is the next Saudi Arabia sized shale oil deposit?  I think we could find out in the next decade.

These technologies were first perfected in the Barnett shale in Texas over a decade ago, and has now become the big growth engine of oil and gas production from Louisiana to northern British Columbia. 

Literally tens of billions of dollars in stock values have been created for oil and gas investors by North American oil and gas plays like the Barnett, the Haynesville gas shale, and the Bakken and Cardium oil formations.

But the question for investors is now – what’s next for shale oil or shale gas? Where will the industry create billions in value next?  Dave is much more technical than I am – he’s a geologist, I’m a journalist – so I asked him to share with readers where he sees the next big opportunities in shale oil and gas, for investors.

“These technologies are quickly going to move around the world,” he said.  “Foreign companies are scrambling to learn the tricks and “take the show on the road”.  We’ve seen a slew of farm-in deals from companies like Total on shale gas acreage in Texas, and other foreign companies in other basins. More than production, these companies are looking to learn from their North American partners, and use this to unlock new basins abroad.”

So which shale basins do you think will get developed next?

“Well, before I answer that, it’s important to know that economic shale gas is about more than just geology. There are a lot of gas-bearing shales around the world. But making money cracking shales is a tough game. You need high-quality services at a reasonable cost. China is cheap but probably not good, and the UK is good but well costs can run 2 to 3 times the cost for a comparable well in Texas. That blows your profitability.”

OK, sssoooo….how will investors know what the next big international shale play?

“Money will be made in overseas shale gas. But it will take places with

1) a strong gas market, and decent pricing,

2) lots of services competition, and

3) basins with good history of conventional production, where geologic data is readily available.

Poland and the Czech Republic have been held up as examples of countries where all these goals might be achieved.

Perhaps more interesting is the shale gas activity that’s starting to pick up in southeast Asia, e.g. northern Thailand. One angle here may be access to affordable, high-quality services from Japan. Combined with a strong southeast Asian gas market, shale gas projects might be economic here.”

In our next story, Dave will help us understand how market economics in the gas industry in Europe is changing, and how that could affect shale gas plays there.

Dave Forest’s analysis on the natural resources sector has been featured on BNN, Kitco.com, Financial Sense and the Daily Reckoning. He is a professional geologist and formerly advised a worldwide client base on oil/gas, mining and renewable energy at Casey Research LLC. Dave currently serves as managing director of Notela Resource Advisors Ltd. and writes the daily e-letter Pierce Points, on natural resources and the macro-economics that drive the sector.

You can sign up for Dave’s daily letter at www.piercepoints.com. (He is a great read – more concise than me).

And yes Part III of Fracking series is coming. 

About Oil & Gas Investments Bulletin

Keith Schaefer, Editor and Publisher of Oil & Gas Investments Bulletin, writes on oil and natural gas markets - and stocks - in a simple, easy to read manner. He uses research reports and trade magazines, interviews industry experts and executives to identify trends in the oil and gas industry - and writes about them in a public blog. He then finds investments that make money based on that information. Company information is shared only with Oil & Gas Investments subscribers in the Bulletin - they see what he’s buying, when he buys it, and why.

The Oil & Gas Investments Bulletin subscription service finds, researches and profiles growing oil and gas companies.  The Oil and Gas Investments Bulletin is a completely independent service, written to build subscriber loyalty. Companies do not pay in any way to be profiled. For more information about the Bulletin or to subscribe, please visit: www.oilandgas-investments.com.

Legal Disclaimer: Under no circumstances should any Oil and Gas Investments Bulletin material be construed as an offering of securities or investment advice. Readers should consult with his/her professional investment advisor regarding investments in securities referred to herein. It is our opinion that junior public oil and gas companies should be evaluated as speculative investments. The companies on which we focus are typically smaller, early stage, oil and gas producers. Such companies by nature carry a high level of risk. Keith Schaefer is not a registered investment dealer or advisor. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer to buy or sell the securities mentioned, or the giving of investment advice. Oil and Gas Investments is a commercial enterprise whose revenue is solely derived from subscription fees. It has been designed to serve as a research portal for subscribers, who must rely on themselves or their investment advisors in determining the suitability of any investment decisions they wish to make. Keith Schaefer does not receive fees directly or indirectly in connection with any comments or opinions expressed in his reports. He bases his investment decisions based on his research, and will state in each instance the shares held by him in each company. The copyright in all material on this site is held or used by permission by us. The contents of this site are provided for informational purposes only and may not, in any form or by any means, be copied or reproduced, summarized, distributed, modified, transmitted, revised or commercially exploited without our prior written permission.

© 2010, Oil & Gas Investments Bulletin

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