For table see Preliminary Ranking of Top North American Gas Marketers By 1997 Sales Volumes (Bcf/d)

Too many marketers? Perish the thought! But that’s what one industry analyst maintains. So many players scrambling after ever-shrinking margins makes for tough competition, especially for the little guys, says PaineWebber gas group analyst Ron Barone.

“I believe there’s going to have to be a shake-out in the industry. To survive, you’re going to have to offer a broad menu of services, including risk management services. And that will all go well for the larger companies as opposed to some of the smaller companies.”

Volumes grew from 1996 to 1997 for nearly all of the largest marketers as shown by preliminary results of NGI’s 1997 marketer volume survey (see Rankings, page 4). Topping the list for the third year in a row are Enron Capital and Trade and NGC, but this year nipping at their heels is PGandE Energy Trading, less than 1 Bcf away from NGC’s No. 2 spot. Leading the pack for growth on a percentage basis was Aquila/UtiliCorp (84% increase), followed by El Paso Energy (up 69%), Coral Energy (up 46%), Sonat (up 30%), and Koch (up 29%).

Williams Energy Services (WESCO) is ranked at No. 16, but gas is only one slice of its energy pie, points out WESCO President Jerry Gollnick. When Williams’ merger with MAPCO is completed, it will double the Williams portfolio of crude oil and refined products with implications for gas, Gollnick said. “If one element of your portfolio has doubled, that gives you the strength and the ability to do things with the other elements of your portfolio.”

John Shealy, senior vice president for industrial sales with Aquila Corp., said Aquila/UtiliCorp grew its volumes mainly by increasing the depth and liquidity of its business. Traditionally operating in the Midcontinent, Gulf Coast and Northeast, the company now has a major presence in nearly all regions of the country, Shealy said. Aquila/UtiliCorp ranked fifth by 1997 volume.

Coral Energy CEO Murry Gerber promised seventh-ranked Coral is “going to be well up on that list by the end of this year. I think we’re going to surprise you guys.” For now, though, Coral rests a fraction below Aquila/UtiliCorp in a tie with Duke Energy.

Coral’s growth was fueled by several items. The company, originally formed by Shell Oil and Tejas Gas, marketed another 500 MMcf/d from its founding partners, Gerber said. In mid-1997, Shell Canada’s volumes were added to Coral. Coral Energy Canada started at about 700 MMcf/d in June and jumped to about 1.3 Bcf/d by the end of 1997, Gerber said. Third-party gas marketed by Coral grew from about 1 Bcf/d in 1996 to about 1.5 Bcf/d in 1997.

While it had more modest growth, NGC still got bigger volume-wise with an increase of more than 8%. In 1997, NGC enjoyed a full year’s contribution from the Chevron gas business it acquired during the second half of 1996. But, though Coral and NGC volumes both grew, their margins shrank.

“Our margins declined from ’96 to ’97,” said NGC COO Steve Bergstrom. He blamed mild weather. “Our margins usually get better with weather where you’re getting more of a physical pull on the commodity. We’re more of a physical player than a financial player.”

Gerber said Coral’s margins were down slightly in 1997. “The days of making a lot of money on baseload supply are over, I think. It’s all in your ability to provide service that [a customer] might not have to be staffing for internally. We’re becoming the energy manager for somebody and saving them money. The margins would fall a hell of a lot faster if it wasn’t for that service.” Sounds like a page from analyst Barone’s play-book. Barone’s thinking appears to be in step with that of NGC’s Bergstrom as well. Both predict consolidation of established players with some leaving the business. Bergstrom looks for “new entrants who think this is free money falling off trees.”

 

Joe Fisher, Houston

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