Top Marketer Volumes Still Showing Tremendous Growth

North America's top 20 largest natural gas marketers based on volume showed a greater than 20% increase in volume (31 Bcf) during the second quarter and only Coral, PG&E, Williams and ExxonMobil reported slight decreases compared to the second quarter of 2000, according to NGI's quarterly ranking of the companies.

"We're seeing a lot more electronic trading," said Ben Schlesinger of Maryland-based Schlesinger & Associates in explaining the causes of the continued growth. "EnronOnline is still seeing growth and so is ICE [IntercontinentalExchange]. I also think we are seeing a lot more financial trading as well. There was plenty in the last year or two, but I think one thing that has continued to change is the real upsurge in the kinds of risk trading that these guys are offering. That's a movement that's likely to continue in the both the gas and electricity markets."

The largest volume and percentage increases among the top 20 were shown by American Electric Power, BP, Mirant, El Paso, PanCanadian and Reliant. AEP jumped from 18th in the ranking in the second quarter 2000 to 10th in 2Q2001 with a 5.5 Bcf/d increase (179%). BP moved up to second place from fifth with a 4.9 Bcf/d increase (66.2%). Mirant came in third with a 4.1 Bcf/d rise (53%). Although El Paso posted 51% volume growth (3.1 Bcf/d), it was pushed down by several other rapidly growing companies to the 9th place from No. 2 behind Enron.

"The question isn't so much volumes as it is profitability," said Credit Suisse First Boston Analyst Curt Launer, noting, however, that it's difficult to compare profitability among the marketers because each one does so many different things within its marketing and trading unit. El Paso Merchant Energy, for example, includes refining results in its marketing profits. "Big volumes also often don't generate big profits, and my guess is some of the companies will fall in very differently in the volume and profitability rankings," said Launer.

"Volumes aren't perfect, but they are the best and most clear thing that we have in terms of gauging the size of these business. That growth you are seeing is going to continue," he said. "This is an industry which really is only reaching one third of the market that is out there for it. If you total all of the things that these companies are doing right now, they really are only addressing about $100 billion worth of what is really a north of $300 billion U.S. energy market. There's probably three to five years worth left of excellent growth because you are going to have a tripling of the market that these companies address over the next several years before you and I have to have a conversation about who has a better business model or who really can gain market share and is doing things better than anyone else."

The merchant energy companies still are not capturing the entire market that's available, he said, because there are so many commercial, industrial and other types of companies out there that have not "entered into the risk management and outsourcing mode for energy.

"Maybe General Motors hasn't done anything to risk manage or outsource its business yet. Maybe Alcoa has just started because they figured out that they could stop making aluminum and sell the power they bought and generate more earnings. There's simply plenty of room for this sector of the industry to branch out and grow."

Top 20 North American Gas Marketers
Ranking by Second Quarter 2001 Sales Volume*
(Bcf/d)


Rank   Company                       2Q01    2Q00  Change
1      Enron (1)                     25.3    22.3     3.0
2      BP (5)                        12.3     7.4     4.9
3      Mirant (4)                    11.8     7.7     4.1
4      Reliant (7)                   11.5     8.2     3.3
5      Duke (3)                      11.0    11.0     0.0
6      Dynegy (8)                    10.9     9.3     1.6
7      Aquila (9)                    10.3    10.0     0.3
8      Sempra (tied 6)                9.3     7.5     1.7
9      El Paso (2)                    9.2     6.1     3.1
10     AEP (18)                       8.5     3.1     5.5
11     Coral (10)                     8.3     9.4    -1.1
12     Conoco (12)                    7.0     5.3     1.7
12     Entergy-Koch Trading (13)      7.0     6.5     0.5
14     Texaco (14)                    4.4     4.1     0.4
15     Cook Inlet (22)                4.2     3.2     1.0;
16     PG&E (21)                      3.9     4.9    -1.0;
17     Williams (15)                  3.6     4.2    -0.6
18     Dominion (16)                  3.6     1.8     1.8
19     ExxonMobil (17)                3.5     3.7    -0.2
20     PanCanadian (24)               3.3     2.2     1.1
 Total                        168.9   137.8    31.0

*Volumes represent North American physical natural gas sales and exclude financial transactions. Sales volumes were provided by company officials. Number in ( ) indicates first quarter 2001 ranking. Transcanada's (11) marketing division is for sale and been reported as discontinued operations.

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