Natural Gas Production and Distribution Industry Profile

The US natural gas distribution industry includes about 500 companies with combined annual revenue of about $130 billion. Major companies include CenterPoint Energy, NiSource, and Sempra Energy, as well as natural gas distribution subsidiaries of companies such as Dominion Resources and ONEOK. The industry is highly concentrated: the 50 largest companies account for about 80 percent of revenue.

The industry includes utilities and other companies that distribute and market natural gas, but not companies primarily engaged in pipeline transportation of natural gas to distribution systems. Natural gas producers are covered in the Oil and Gas Exploration and Production industry profile.

COMPETITIVE LANDSCAPE

Demand for natural gas is driven by overall US economic activity. The profitability of natural gas distributors depends largely on the efficiency of their operations. Companies that operate multiple distribution networks may enjoy economies of scale in purchasing. The industry is capital-intensive: average revenue per employee is about $1.6 million.

PRODUCTS, OPERATIONS & TECHNOLOGY

Distribution of natural gas directly to consumers accounts for about 60 percent of industry revenue; wholesale distribution and marketing accounts for about 30 percent.

Natural gas distributors buy gas from producers or gas marketers and distribute it to local customers via networks of pipelines. The "penetration" of a local distributor is the percentage of homes in its territory that use natural gas. Large industrial users and electricity generators often bypass the local distributor and deal directly with pipeline companies and marketers. Gas ...