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FERC Form 552 Data Shows Record High Natural Gas Trading Volumes in 2011

Total combined natural gas purchase and sales volumes reached 124,752 TBtu in 2011, a 2.5% increase compared with 121,682 TBtu in 2010, according to an analysis by Natural Gas Intelligence (NGI) of 2011 Form 552 filings with FERC.

While the rate of growth in combined volumes was down from the 6.0% year-to-year gain reported last year (see Daily GPI, July 14, 2011), the 2011 total yearly combined volume was the highest volume recorded since the Federal Energy Regulatory Commission (FERC) began releasing the data in 2009 (see Daily GPI, June 29, 2009).

BP plc saw its volumes in 2011 decline 12.4% compared with 2010 but remained the top marketer with 7,609.4 TBtu and a 6.1% market share, according to NGI's fourth annual review of Form 552 filings. ConocoPhillips, which had been ranked third in last year's report, moved into the second spot with 6,412.6 TBtu and a 5.1% market share, stepping past Shell Energy NA, which now holds the third spot with 5,396.0 TBtu and a 4.3% market share. Macquarie Energy (4,449.7 TBtu, 3.6%) and J.P. Morgan (3,533.3 TBtu, 2.8%) remained at No. 4 and No. 5, respectively.

AGL Resources was the one newcomer to the top 10, rising from No. 12 in 2010 to No. 9 in 2011 with 2,825.7 TBtu bought and sold and a 2.3% market share. Meanwhile, BG Group was the only company to fall out of the top 10, slipping one to No. 11 with 2,765.1 TBtu and 2.2% of market share.

Dominion was the biggest mover, jumping from No. 69 in last year's survey to No. 15 this year with 1,878.7 TBtu and 1.5% market share. Other companies new to the top 50 are EOG Resources Inc. (up to No. 29 from No. 57), Goldman Sachs (up to No. 40 from No. 59), Constellation Energy (up to No. 46 from No. 64), MGI Supply Ltd. (up to No. 48 from No. 56) and QEP Resources (up to No. 49 from No. 63).

Sempra, which bought and sold 953.9 TBtu in 2011, saw the most precipitous decline, dropping to No. 36 from No. 13 in 2010, when it had reported 1,968.9 TBtu -- though the company maintained its 0.8% market share. Bank of America/Merrill Lynch, Texla Energy Management, National Grid, United Energy Trading, Crosstex Energy and Black Hills Corp. all fell out of the top 50 since the last Form 552 report.

The likelihood of the total marketed growth rate accelerating anytime soon is slim, according to Ken Medlock, a Baker Institute fellow in energy studies at Houston's Rice University. "Demand has picked up, but certainly not enough to offset the growth of supply, coupled with no winter," Medlock told NGI. "And so that leaves us in a situation where storage is just very, very full."

April ended with an estimated 2.61 Tcf in storage, about 46% more than the same time last year. For the week ending May 24, working inventories totaled 2,744 Bcf, according to EIA's Weekly Natural Gas Storage Report, a 750 Bcf increase compared to last year and 753 Bcf above the 2007-2011 average. The Energy Information Administration (EIA) has said it expects that inventory levels at the end of October will set a new record high at 4,096 Bcf.

"Quite frankly, this year could get uglier before it gets any better, depending in large part on what happens this summer," including the number of cooling degree days fostered by summer heat and the impact of the Atlantic hurricane season, which officially begins Friday, Medlock said. "If you asked me to make a prediction, I'd say September and October could get nasty."

"This isn't the first time we've been in this rodeo," Medlock said. "If you just go back into the '90s, there have been times when we're just very robust on the supply side and demand really isn't there; the market gets really ugly and October contracts are trading in the 1s...it's almost like the market hits reset when this happens. If you have any kind of winter weather that brings us back up -- it's almost as if things have to crash before they get any better. I can very well see 2012-2013 shaking out very much like that.

"Sometimes that can be viewed as a good thing from a market perspective because low prices are the best cure for low prices. They kind of weed out the firms that are drilling without any kind of capital discipline and it creates a lot of M&A [mergers and acquisitions] opportunity and it ends up putting the market back into an equilibrium state that is sustainable."

Sales volumes were 62,112 trillion Btu (60.5 Tcf) for the year, according to the reportable transaction information for 2011 submitted on Form 552s. When compared to total marketed production data reported by EIA, those volumes indicate that on average the same gas was sold 2.50 times between the wellhead and the burnertip in 2011, down from 2.66 times in 2010.

The percentage of volumes reported to FERC, which were eligible to be included in price indexes such as those published by NGI, fell to 29.0% in 2011, down from 30.0% in 2010.

On the other hand, the percentage of transactions purchased and sold on index increased to 68.2% in 2011, up from 67.8% in 2010.

Physical basis transactions were 7.2% in 2011, in line with the 7.4% figure from 2010.

Companies must fill out and file a Form 552 report annually if either their sales or purchases run more than 2 trillion Btu. Only arms-length physical gas transactions that are tied to a day-ahead or month-ahead index, or that contribute to, or are eligible to be contributed to the formation of a gas index are reported. That necessarily excludes bundled (gas plus transportation) retail sales by utilities at a tariff rate, or sales and purchases outside the day-ahead or month-ahead markets.

Companies may aggregate affiliate data or file separately. For its analysis NGI aggregated all affiliate data to get company-wide totals and in some cases converted thermal units to cubic feet to facilitate comparisons with production data.

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