The Uncertain Future of American Shale Gas

On February 22, 2012 — No comments

There is so much hullabaloo surrounding natural gas these days, you’d think we’d have a clearer picture of what the future holds for domestic supplies of the stuff. Fact is, we don’t. From accurate reserve estimates to commodity pricing, it’s time we were honest with ourselves about how much we really don’t know about our shale gas.

The latest and greatest data from the Energy Information Administration contains total gas estimates that are much lower than its numbers from last year. In 2011, the EIA estimated there were 827 trillion cubic feet of natural gas in U.S. shale. In 2012, that number dropped to 482 Tcf. The agency also commented specifically on gas trapped in the Marcellus Shale. Once pegged at 410 Tcf, the EIA now estimates that number is really closer to 141 Tcf, a 66% reduction.

The logic behind the new number is that much more information is available to the agency now than in years past. So that settles it, right? Not exactly. The U.S. Geological Survey estimates that there is only 84 Tcf of natural gas in the Marcellus Shale, almost half of what the EIA estimates. The agencies clearly use different methods of calculating reserves, and we may never know which one is more accurate.

They are not the only ones with varying methods of calculation; gas companies have their own formula, too. In fact, The New York Times reports that the combined reported Marcellus reserves of Chesapeake Energy (NYS: CHK) and Range Resources is equal to the federal estimate for the entire region.

Conflicting estimates can leave investors scratching their heads. How much gas is there? Apparently, no one really knows. And that’s not all we don’t know!

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