The U.S. natural gas market has grown for the last two years. The number of U.S. natural gas transactions reported for calendar year 2011 total 131,436 million mmBtu transacted by 686 companies, an 8 percent increase from 2010 and a 15 percent increase from 2009, according to a new study published by Cornerstone Research, which examines data from recently released Federal Energy Regulatory Commission (FERC) Form No. 552 submissions.
FERC uses Form 552 to collect transactional information from natural gas market participants. It provides information regarding physical natural gas transactions that use an index and transactions that contribute to, or may contribute to gas price indices.
The 2011 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 25 years.
The following are key findings from the Cornerstone Research study, Characteristics of U.S. Natural Gas Transactions—Insights from FERC Form 552 Submissions:
Key Findings
- The U.S. natural gas industry is unconcentrated with a large number of diverse participants. The top 20 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 Intercontinental Exchange (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 29 times the average daily day-ahead volume and 46 times the average monthly month-ahead volume of the bottom quartile of hubs.
The full text of the report is available at the Cornerstone Research website at: www.cornerstone.com/FERC-Form-552-Submissions-May-2012.
