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Natural Gas Surplus Threatens to Slow Drilling Boom
The Associated Press | April 09, 2012 | 09:27 AM EDT

That would cause the price of natural gas, which has been halved over the past year, to nosedive. Citigroup commodities analyst Anthony Yuen says the price of natural gas — now $2.08 per 1,000 cubic feet — could briefly fall below $1.

"There would be no floor," he says.

Since October, the number of drilling rigs exploring for natural gas has fallen by 30 percent to 658, according to the 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 Fayetteville Shale in Central Arkansas. But natural gas production is still growing, the result of a five-year drilling boom that has peppered the country with wells.

The workers and rigs aren't just being 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 drilling.

Analysts say that before long companies could have to start slowing the gas flow from existing wells or even take the rare and expensive step of capping off some wells completely.

"Something is going to have to give," says Maria Sanchez, manager of energy analysis at Bentek Energy, a research firm.

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