Cornerstone Research has published a new study entitled Characteristics of U.S. Natural Gas Transactions—Insights from FERC Form 552 Submissions. According to the study, the transactions reported in the recently released Form 552 submissions for calendar year 2011 totaled 131,436 million mmBtu transacted by 686 companies, an 8 percent increase from 2010 and a 15 percent increase from 2009. The increase in transactions occurred in the midst of a revival in U.S. natural gas production, with annual marketed production increasing by 28 percent from 2005 to 2011. This increase is due to the development and expansion of shale natural gas production, which the Energy Information Administration (EIA) predicts will increase from 23 percent to 49 percent of U.S. natural gas production over the next twenty-five years.
Dr. Greg Leonard, Vice President of Cornerstone Research:
“This detailed analysis provides insight into the increasingly important over-the-counter physical market for natural gas in the United States. As natural gas production expands, the industry remains unconcentrated with the top twenty companies accounting for slightly more than half of the transaction volume.”
“A large number of companies continue to be active in the natural gas market; the base of information-forming indices is sizeable and robust with 126 companies reporting transaction volumes to the price index publishers.”
“In 2011, 72 percent of physical natural gas transaction had prices dependent on price indices, underscoring the importance of a robust process for determining the indices. Going forward, the continued analysis of the characteristics and volume of price-reporting companies will be informative to the marketplace.”
- The U.S. natural gas industry is unconcentrated with a large number of diverse participants. The top twenty transacting companies by volume account for slightly more than half of the transaction volume covered by the Form 552 submissions. Traders or Wholesale Marketers continued to report the largest transaction volumes, accounting for approximately 41 percent of transactions.
- The share of transactions based on index prices increased modestly from approximately 69 percent in 2008 to 72 percent in 2011. The index-setting, fixed-price natural gas transactions account for a quarter of the volume of index-based natural gas transactions, which has remained relatively stable over time.
- The 2011 proportion of net buyers and net sellers reporting to the price index publishers did not remain stable in 2011; for the first time in the last four years, the proportion has departed from a relatively equal division. In 2011, net buyers reported 58 percent of transactions whereas net sellers reported 37 percent of transactions.
- A comparison of fixed-price physical transactions reported by the company-level Form 552 submissions and hub-level IntercontinentalExchange (ICE) data shows that fixed-price physical transactions reported by ICE from 2008 to 2011 represent approximately 70 percent of the Form 552 volume. The top quartile of North American natural gas hubs reported by ICE has twenty-nine times the average daily day-ahead volume and forty-six times the average monthly month-ahead volume of the bottom quartile of hubs.
Click here for the full report.