Gas Glut May Grow as XTO, Devon Wells Prove Prolific
By Jim Polson and Edward Klump

Aug. 6 (Bloomberg) -- The largest U.S. natural-gas producers may be doing too well at the wellhead for their own good, pumping so much of the heating and power-plant fuel that prices won’t soon recover from last year’s market collapse.

XTO Energy Inc. and Devon Energy Corp., two of the five largest producers of U.S. gas, yesterday reported record output and smaller declines in earnings than analysts estimated. Anadarko Petroleum Corp., London-based BP Plc and Chesapeake Energy Corp. previously reported second-quarter output gains that helped them beat estimates.

Even as they lament a gas glut, the companies have been reluctant to let revenue and profits fall further in the short term by being the first to curtail output. Second-quarter production at Fort Worth, Texas-based XTO jumped 32 percent, and Devon of Oklahoma City had a 12 percent gain.

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Under 3 bucks today.
Lowest price since August, 2002.

In recent years, gas hydrates have been found in more accessible settings, such as sandy deposits off the coast of Alaska and in the northern Gulf of Mexico. Sand reservoirs of gas hydrates also have been identified off the shores of southeastern Japan and Canada's Northwest Territories. Gas hydrate reserves have also been found in offshore clay sediments near India and Korea.

Drilling tests have suggested that extracting the methane from the sandy deposits could become commercially feasible, Boswell said. One method calls for reducing the pressure in the well bore, liberating the methane gas from the water. Another method involves injecting carbon dioxide to displace the methane from cavities in the deposits. The second method has the added benefit of locking up CO2, which could address climate change.

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