An International Energy Agency report yesterday reinforced the natural gas industry's battle cry that a 100-year supply of gas exists under the continental United States. But that assumption is no longer without skeptics, as one geologist has challenged the science and costs of squeezing gas from shale rock to use as an alternative to oil and coal.

"T. Boone Pickens wants to convert our entire fleet of cars and trucks to natural gas," said Arthur Berman, an independent Houston-based geologist. "Well, what if we invest in that, then turn around to find there's not enough gas? You need scenarios based on other possible outcomes."

Berman in recent weeks has publicly challenged the claims of industry giants such as Pickens, Chesapeake Energy Corp. and the flock of gas industry trade groups in Washington that say the United States is not only the Saudi Arabia of coal, but also the Saudi Arabia of natural gas. They also say lawmakers should include greater incentives for gas production and distribution in energy and climate bills before Congress.

The Potential Gas Committee estimates that the United States now has 2,047 trillion cubic feet of potential natural gas supply, which is a 35 percent jump from its previous estimate two years ago and is enough to supply the U.S. market for nearly 100 years. The notion that the United States has huge recoverable gas reserves rests on the expansion of shale and coalbed methane natural gas fields in Texas, Oklahoma, Arkansas, Louisiana and Pennsylvania in the past five years. Yesterday's IEA report says the surge in U.S. production of unconventional gas changes the equation in North America and for much of the world.

A 'game changer' in terms of supply?

"New technology, especially horizontal-well drilling combined with hydraulic fracturing, has increased productivity per well from unconventional sources, notably shale gas, and cut production costs," IEA says.

IEA estimates the recoverable gas resource base at 850 trillion cubic meters, and about 45 percent of that is unconventional gas such as shale. Nearly 90 percent of recoverable gas resources remains in the ground.

America's Natural Gas Alliance, a new gas industry advocacy group, jumped on yesterday's report. "As Congress debates energy and climate legislation, any bill aiming to curb carbon emissions must encourage the use of clean, homegrown natural gas," said David Trice, its chairman.

IEA's "World Energy Outlook" projects the return of global gas demand as the economy recovers, saying the pace of growth turns on the strength of national and global climate change policy. Through 2030, IEA also says, nations will need to spend $37 trillion on energy technologies to stabilize greenhouse gas emissions and meet rising energy demand. Under most scenarios, natural gas demand continues to rise through 2030, IEA says.

"Constraints on the rate at which low-carbon technologies can be deployed, and the low-carbon content of gas relative to coal and oil, mean that gas demand will continue to expand," IEA says.

The report considers energy demand under a "450 scenario," in which atmospheric greenhouse gas emissions stabilize at 450 parts per million. World gas use increases 17 percent between 2007 and 2030. Under a "reference scenario" that assumes a 1.5 percent annual increase in global energy demand, China and India will drive an increase in gas demand from 3 trillion cubic meters in 2007 to 4.3 trillion cubic meters in 2030.

But a current gas glut complicates production prospects

The Paris-based agency projects a 2 percent drop in global energy demand this year, which is the largest drop in nearly 30 years. As a result, IEA warns of an "acute glut of gas supply" in the next few years.

The gas glut could have substantial consequences for gas supply contracts and spot prices in Europe and Asia, IEA says, and sagging gas export prices could force buyers in Europe and Asia to modify terms and decouple gas prices from oil prices. The continuation of rock-bottom U.S. gas prices will discourage liquefied natural gas imports to North America, IEA says.

In the United States, IEA says, drilling activity has fallen, but production has held up, suggesting that marginal production costs continue to fall. Unconventional gas sources can boost North American production for a cost of less than $5 per million British thermal units (MMBtu) for decades to come, according to IEA, which is a figure major gas drillers say is feasible.

Are gas shale wells reliable?

IEA acknowledges that rising material costs and rig rates will make drilling more expensive over time. "The high decline rates of unconventional gas will also require constant drilling and completion of new wells to maintain output," it says.

Replicating North America's shale gas boom globally "remains highly uncertain," says the report. "Some regions, including China, India, Australia and Europe, are thought to hold large resources, but there are major obstacles to their development," it says. Access to resources, water use to extract gas, environmental impacts and pipeline infrastructure issues all limit the scope of global gas shale development.

The Houston geologist Berman, alongside well-known "Peak Oil" critic of oil projections Matthew Simmons, has started to question why gas shale wells decline so quickly after an initial surge in productivity.

"The decline rates are astronomical," Berman said in an interview. "Operators are spending more and more money trying to overcome this problem."

Top independent gas producers that rely heavily on debt to expand production, such as Chesapeake, BP PLC, Anadarko Petroleum Corp., Devon Energy Corp. and XTO Energy Inc., are betting big that the decline rates will flatten, Berman said. "But there is a certain probability that the outcome will not be what they say it is," he said. Berman also asserted that the cost of hydraulic fracturing and other invasive methods of extracting gas from shale is getting more expensive, not less, as producers claim.

What is the cost of future production?

U.S. gas prices dropped under $3 per MMBtu on the New York Mercantile Exchange in September and have been below $4 per MMBtu for months.

Chesapeake said in an investor presentation this month that gas prices will rise to levels supporting drilling on higher-cost assets and lead to stronger margins in low-cost shale plays. A Chesapeake spokesman said the November report is meant, in part, as a response to Berman's claim that shale assets will face declining production rates and rising costs.

David Pursell, an energy analyst at Tudor, Pickering, Holt & Co., responded more directly to Berman. "He's wasting people's time," Pursell said. "There is plenty of unconventional gas resources in the United States."

Berman said he's not challenging the abundance of resource, but rather the ability to extract it at a reasonable price.

In Washington, lawmakers have been openly reluctant to fully embrace natural gas as a fuel that could replace a significant portion of coal-fired generation. Some fear price volatility, which occurred earlier this decade as prices increased rapidly and sent some gas-dependent industries overseas. Others say there is a concern about gas prices causing an increase in home heating costs if too much gas is relied upon by the electricity sector.