An oil and gas mega-giant so large that it only needs initials to identify it — BP — also has become a leader in energy merchant services, after moving into the top spot of natural gas marketers in NGI‘s first quarter survey. As expected, producers like BP, ConocoPhillips and Shell’s trading arm, Coral Energy, are beginning to command the energy merchant stage, as the former leaders, led by Mirant, AEP, Duke Energy and Dynegy, all slowly take their bow and exit stage left.
BP, which had been in fifth place in the third quarter 2002 survey, proved its mettle in the first quarter, garnering 20.1 Bcf/d in physical gas sales, up substantially from a year ago, when its gas sales totaled 14.9 Bcf/d. Its big move to the top spot appeared to come in the first quarter, after steady production numbers throughout 2002 averaged 15.6 Bcf/d.
“There has been a steady increase, but over the past few years the market has changed significantly,” said Neil Chapman, public affairs spokesman for BP Energy, which is based in Houston. “BP has the physical volumes, a strong credit rating and a focus on the customer, and all of these things have benefited.”
Chapman said “all of the elements are coming together, and that has been a mutual benefit in being able to offer smaller producers opportunities to get their gas to market and obviously, we have gas to get to market, and the people in our business have worked very hard to meet the customers’ needs.”
Of the changes in the energy merchant sector, Chapman said BP believes that “having physical volume is the key.”
Mirant, which had claimed the top spot in the rankings for most of last year, still managed to retain second place in the survey, with 14.1 Bcf/d in volume. However, Mirant showed a huge drop compared with its numbers a year ago of 21.5 Bcf/d. The embattled energy merchant is working to reorganize under a prepackaged plan (see related story), and has sold its Canadian aggregation and gas sales contracts to Cargill, worth about 3.5 Bcf/d, which, when closed later this year, will undoubtedly move Mirant further down the list (see Daily GPI, May 2).
The rest of the top five remain producer-heavy, with Coral Energy moving into third position with 9.9 Bcf/d in physical sales volume. Coral averaged 9 Bcf/d in sales in 2002, with 9.2 Bcf/d in the first quarter a year ago. Integrated Sempra Energy also showed signs of growth, climbing from 11th place in the third quarter to fourth place in the first quarter, with 9.45 Bcf/d in volume, up from 7.37 Bcf/d for the same period a year ago.
Rounding out the top five marketers was oil major ConocoPhillips, which nearly doubled its gas sales in the first quarter, with 8.8 Bcf/d, compared with 4.6 Bcf/d a year ago.
“Basically, the ConocoPhillips merger, finalized on Aug. 30, 2002 increased the amount of equity gas available for us to sell,” said a ConocoPhillips spokeswoman on Friday. “Also, the consolidation within the natural gas marketing industry presented additional opportunities for us.”
In sixth place for the quarter was El Paso Corp., which reported gas sales of 5.5 Bcf/d, another huge drop compared with its reported sales of 13.2 Bcf/d a year ago. El Paso, which is exiting the trading business, is expected to fall completely out of the rankings this year. Cinergy claimed the seventh spot, with 4.17 Bcf/d, with steady marketing sales compared with 2002’s average of 3.46 Bcf/d.
In eighth place was ChevronTexaco, which reported 4.01 Bcf/d for the quarter, down from its 6.7 Bcf/d a year ago. However, in the months to come, the oil major is expected to make a bigger splash in the energy marketing arena. In April, it unveiled its new subsidiary, ChevronTexaco Global Gas, which will consist of existing gas-focused organizations, including ChevronTexaco Natural Gas (current marketer of North American gas), the International Gas Group and Worldwide Power and Gasification (see Daily GPI, May 22). Dynegy had marketed all of the oil major’s natural gas in North America until this year. The company also has announced that it will cease trading.
Reliant Resources Inc. saw its gas sales drop nearly 53% in the first quarter over a year ago, but it still managed to take the ninth position in the marketer list. The Houston-based merchant reported gas sales of 4 Bcf/d in the quarter, compared with 8.5 Bcf/d a year ago. Williams and Oneok both increased their gas sales in the quarter and tied for the tenth spot, each posting sales of 3.5 Bcf/d. A year ago, Williams had sales of 2.6 Bcf/d, while Oneok’s was 2.2 Bcf/d. However, the future of Williams’ trading business is far from certain.
Total volumes from the top 20 gas marketers fell 13%, or about 15.3 Bcf/d, to 102.8 Bcf/d. It’s unclear whether the large drop resulted from companies no longer engaging in round-trip trades or if it simply was a decline in trading overall.
AEP, which had been in second place last year, no longer reports its physical gas sales numbers. Duke, Dynegy and Dominion also opted not to report sales figures. Aquila, which had been second in sales a year ago with 16.2 Bcf/d, is exiting the trading busines and reported gas sales in the first quarter of only 3.1 Bcf.
Who are the players on the horizon? With several energy companies now opting out of the merchant business, more producers are expected to pick up the slack. Analyst John Olson of Sanders Morris Harris expects Oneok to become one of the merchant leaders going forward.
“With $6 billion in assets, [Oneok] in the last five years took its earnings from $17 million to $180 million,” Olson said last month (see Daily GPI, May 30). “They locked up a tremendous amount of storage, and they are one of the largest marketers coming out of the Rocky Mountain region. They can target every region of the country. They have their act together. These guys are the runaway winners in the marketing business.”
Standard & Poor’s Ratings Service analyst Craig Shere also said recently that he expects to see energy merchants consolidate their operations with companies that have stronger credit ratings. These consolidations, said Shere, “would be driven by a growing need for natural gas to supply power plants, the increased scale required to manage volatile natural gas prices and rising credit requirements for all operations.”
Top 20 North American Gas Marketers
Ranking by 1Q2003 Sales Volume*
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