Henry Groppe of Groppe, Long and Littell, who I view as the most reliable analyst in the oil and gas business, was on BNN on Friday and revealed his research on natural gas going forward. He stated that natural gas is at a point where it "is greatly undervalued in terms of the fundamentals. The controlling fundamental is that natural gas production peaked in the US 40 years ago and will inexerably decline long term and we've recently had this diversion of shale gas which would appear to overturn everything, in reality it's only about 13% of our total gas supply and 60% of that is the oldest development the Barnett Shale, which peaked a year ago and is in significant decline so only 6% of it is that growing portion of our gas production everything else is in decline."

Howard Green: " So why such a drastic reaction by the market, is it because it is a marginal production market that we are dealing with?"

Henry Groppe: "A lack of understanding. We have been having an increase in drilling activity all devoted to that 6% and not a very profound understanding that all the rest of the supply is in decline, and it's a misinterpretation that that's going to flood the US with natural gas and that reality will become clear reasonably quickly. Another factor is natural gas is the incremental fuel for power generation in the United States, and there's an increasing use of it there in order to have adequate power supply, and at current gas prices if they were to continue all year that would create an 8 billion foot a day increase in demand for power generation, it's not available so gas prices have to almost double in order to moderate that rapidly growing otherwise demand."

Dean Orricco of Middlefield Capital went on to say that it might take 3 or 4 months for this to be realized. but when it does "we can see prices move very dramatically."

http://watch.bnn.ca/market-call/april-2010/market-call-april-16-2010/#clip290075

Best Wishes; Scott