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Survey Finds More, Larger Secondary NatGas Pipeline Capacity Deals This Year

The latest ranking of the top 20 natural gas pipeline capacity traders by volume from Capacity Center includes an upset in the top position as well as the departure of seven companies from the ranking. Deals have increased in duration, and there is more concentration in the sector, too, the firm said.

Sequent Energy Management unseated Tenaska from the No. 1 position, a slot Tenaska had held for seven years straight, or since the annual ranking began.

Sequent traded an average daily equivalent pipeline capacity volume of more than 5.8 Bcf/d, outpacing second-place Tenaska at just under 5.5 Bcf/d. In total transacted quantity, Sequent at 4,348 Bcf total traded in 1,440 deals nearly doubled Tenaska's 2,214 Bcf total traded in 308 deals.

For the balance of the top five, Direct Energy and BP plc both retained top-five status, each dropping one place to third and fourth, respectively, although they increased their daily traded quantities by 1.1 Bcf/d (Direct) and 0.5 Bcf/d (BP). New to the top five is NRG, which didn't make the top 20 last year. It moved up 22 places within the top 100 to earn the No. 5 slot.

Sequent, predominantly a wholesale market player, acquired 44% of its daily equivalent capacity from local distribution companies (LDC), 37% from producer-marketers and 18% from power generators. But Tenaska, also predominantly a wholesale player, acquired 80% of its capacity from producer-marketers, 17% from LDCs and 3% from power generators.

Direct Energy, primarily a gas marketer to commercial and industrial (C&I) customers, obtained 72% of its capacity from LDCs, 27% from producer-marketers and 1% from power generators. Fourth place BP, a wholesale and to some extent a C&I player, obtained 53% of its capacity from producer-marketers, 44% from LDCs and 2% from end-users with their own transportation capacity, according to Capacity Center.

This year saw much jockeying as several companies dramatically increased capacity trading to move up in the ranks of the top 100 to earn a spot in the Top 20. Koch Industries moved up 21 places to No. 8; ConocoPhillips moved up 19 places to No. 12; Noble Energy Inc. moved up 32 places to No. 13; BNP Paribas moved up 46 places to No. 14; EDF Trading moved up nine places to No. 15; and Texla moved up 18 places to No. 16.

The ranking marked the departure from the top 20 of Macquarie (formerly No. 11), Interstate Gas Supply (formerly No. 12), J Aron & Co. (formerly No. 13), SCANA Corp. (formerly No. 14), CenterPoint Energy unregulated (formerly No. 15), Equitable unregulated (formerly No. 16), and Duke Energy unregulated (formerly No. 20).

The number of capacity traders in the overall market declined from 430 a year ago to just above 400. However, the number of deals increased year/year, and the deals became larger and longer in 2015 as compared to 2014, Capacity Center said. This combined to create a significant increase in the total capacity traded.

"Against this backdrop, it is also notable that EIA [Energy Information Administration] statistics show daily production of gas reaching approximately 70 Bcf/d and that Capacity Center statistics indicate just under 50% of this volume was flowing through the 34.36 Bcf/d of daily equivalent secondary market capacity during the first eight months of 2015," the firm said. "This is more than 300% higher than the amount of daily equivalent reported in 2009 (10.9 Bcf/d).

"Continuing the trend we observed last year, longer-term deals are becoming more prevalent in the market. While total daily equivalent traded through Aug. 31, increased from 26 Bcf/d to 34 Bcf/d, the quantity of total transacted (regardless of term) increased from 14,721 Bcf to 20,236 Bcf. In addition, the number of deals done between Jan. 1 and Aug. 31 increased from 28,666 to 31,056."

The capacity trading market continued a trend toward greater concentration, Capacity Center said. "Concentration in both the top 20 and the top five increased markedly, with the top 20 accounting for 72% of all daily equivalent capacity traded and the top five representing 74% of the capacity traded by the top 20."

Like last year's survey (see Daily GPIDec. 10, 2014), this year's revealed that the most active pipeline markets for capacity trading were those serving the Northeast producing region as well as those in the "very mature and active competitive retail markets," Capacity Center said. The top five in the pipeline ranking are:

  • Transcontinental Gas Pipe Line Co. (Transco) at more than 3.3 Bcf/d and nearly 2.5 Tcf total traded, up from 2.4 Bcf/d and 1.7 Tcf total traded in 2014;
  • Texas Eastern Transmission with 2.28 Bcf/d and 2.37 Tcf total traded, up from 1.9 Bcf/d and over 2.07 Tcf total traded in 2014;
  • ANR Pipeline with 2.04 Bcf/d and 0.8 Tcf total traded, up from 0.95 Bcf/d and 0.39 Tcf total traded in 2014;
  • Columbia Gas Transmission at 2.0 Bcf/d and 0.9 Tcf total traded, essentially even with 2014 at 2.03 Bcf/d and 0.9 Tcf total traded;
  • Rockies Express Pipeline -- which moved up dramatically as the shippers on its East-to-West reversal for the most part traded their capacity to asset managers -- 1.8 Bcf/d and 0.89 Tcf total traded, up from 0.16 Bcf/d and 0.12 Tcf total traded in 2014.

The survey considered Capacity Center's database of transportation capacity release deals done on every pipeline from Jan. 1 through Aug. 31. Ranking data excluded volumes done due to acquisitions and between related affiliates.

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