This page contains a Flash digital edition of a book.
Page 18 ■ Thursday, April 12, 2012


Natural gas glut means drilling boom must slow


The U.S. natural gas market is burst- ing at the seams. So much natural gas is being pro-

duced that soon there may be nowhere left to put the country’s swelling surplus. After years of explosive growth, natural gas producers are retrenching. The underground salt caverns, de-

pleted oil fi elds and aquifers that store natural gas are rapidly fi lling up after a balmy winter depressed demand for home heating. The glut has benefi ted businesses and

homeowners that use natural gas. But with natural gas prices at a 10-year low — and falling — companies that pro- duce the fuel are becoming victims of their drilling successes. Their stock pric- es are falling in anticipation of declining profi ts and scaled-back growth plans. Some of the nation’s biggest natural

energy services company Baker Hughes. Some of the sharpest drop-offs have been in the Haynesville Shale in Northwestern Louisiana and East Texas and the Fayette- ville Shale in Central Arkansas. But natu- ral gas production is still growing, the re- sult of a fi ve-year drilling boom that has peppered the country with wells. The workers and rigs aren’t just be- ing sent home. They are instead being put to work drilling for oil, whose price has averaged more than $100 a barrel for months. The oil rig count in the U.S is at a 25-year high. This activity is adding to the natural gas glut because natural gas is almost always a byproduct of oil drill- ing.

nies could have to start slowing the gas fl ow from existing wells or even take the rare and expensive step of capping off some wells completely. “Something is going to have to give,”

gas producers, including Chesapeake En- ergy, ConocoPhillips and Encana Corp., have announced plans to slow down. “They’ve gotten way ahead of them-

selves, and winter got way ahead of them too,” says Jen Snyder, head of North American gas for the research fi rm Wood Mackenzie. “There hasn’t been enough demand to use up all the supply being pushed into the market.” So far, efforts to limit production have

says Maria Sanchez, manager of energy analysis at Bentek Energy, a research fi rm. U.S.

barely made a dent. Unless the pace of production declines sharply or demand picks up signifi cantly this summer, ana- lysts say the nation’s storage facilities could reach their limits by fall. That would cause the price of natural

gas, which has been halved over the past year, to nosedive. Citigroup commodi- ties analyst Anthony Yuen says the price of natural gas — now $2.08 per 1,000 cu- bic feet — could briefl y fall below $1. “There would be no fl oor,” he says. Since October, the number of drilling

boomed in recent years as a result of new drilling techniques that allow companies to unlock fuel trapped in shale forma- tions. Last year, the U.S. produced an av- erage of 63 billion cubic feet of natural gas per day, a 24 percent increase from 2006. But over that period consumption has grown half as fast. The nation’s storage facilities could easily handle this extra supply until re- cently because cold winters pushed up demand for heating and hot summers led to higher demand for air condition- ing. Just over half the nation’s homes are heated with natural gas, and one-quarter of its electricity is produced by gas-fi red power plants. But this past winter was the fourth

rigs exploring for natural gas has fallen by 30 percent to 658, according to the

warmest in the last 117 years, according to the National Oceanic and Atmospher- ic Administration. It was the warmest March since 1950.

Continued on next page Associated Press

Range Resources site manager Don Robinson stands with the rods that connect to drill into the shale at a well site in Washington, Pa., in this July 2011 fi le photo. After years of explosive growth, natural gas producers are quickly retrenching.

natural gas production has Analysts say that before long compa-

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32