Natural Gas Distribution & Marketing
Companies in this industry operate natural gas distribution systems that serve customer locations, broker the sale of gas to distributors, and buy natural gas and directly distribute it to customers. Major companies include CenterPoint Energy, NiSource, and Sempra Energy (all based in the US); Centrica (the UK); Engie (France); GasTerra (the Netherlands); Gazprom (Russia); and Naturgy (Spain); as well as the natural gas distribution subsidiaries of US companies such as Dominion Energy and Duke Energy.
Global consumption of natural gas in 2021 amounted to about 4 trillion cubic meter, according to Statista. Natural gas consumption is projected to increase by 35% from 2020 to 2050 due to economic growth driven by exports and industrial use, according to the US Energy Information Administration. Growth in natural gas consumption is strongest in emerging markets, including China and India.
The US natural gas distribution and marketing industry includes about 2,600 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $101 billion.
Natural gas producers are covered in the Oil & Gas Exploration & Production industry profile. Companies primarily engaged in pipeline transportation of natural gas from production sites to distribution systems are covered in the Natural Gas Pipelines industry profile.
Demand for natural gas is driven by energy use, which in turn is influenced by overall economic activity. The profitability of natural gas distributors depends largely on the efficiency of their operations, because prices typically are fixed by public utility commissions (PUCs). Companies that operate multiple distribution networks may enjoy economies of scale in purchasing. Small companies can compete effectively through a strong regional presence. The US industry is highly concentrated: the 50 largest companies account for about 90% of revenue.
Economic downturns can impact gas distribution and marketing operations. During the 2020 COVID-19 pandemic, gas companies saw decreased demand from industrial and commercial customers due to stay-at-home orders. Many utilities expanded residential service assistance programs to keep unemployed workers from being disconnected.
Distribution utilities have limited exposure to competition due to natural monopolies and high barriers to entry. Utilities are awarded long-term franchise contracts by counties and municipalities, allowing them to operate gas transmission and distribution facilities in a given service territory. Infrastructure maintenance is a major expense. In deregulated markets, consumers are able to shop for a gas supplier, though distribution duties remain with the local utility. A majority of US states have some form of gas deregulation, though it may be restricted to certain territories or offered only to large consumers. Some states with deregulated markets have little to no participation.
Due to domestic production increases, the US was a net exporter of natural gas in 2017 (and again in 2018) for the first time in 60 years. The US exports natural gas to more than 30 countries; gas shipped by pipeline to Mexico accounts for more than 60% of exports. A portion of exports consist of LNG (liquefied natural gas) or CNG (compressed natural gas) exported on ships or trucks. Nearly all imports of natural gas come by pipeline, primarily from Canada. LNG, mainly from Trinidad and Tobago, accounts for about 3% of natural gas imports to the US.
Products, Operations & Technology
Natural gas distribution and support services accounts for about 60% of industry revenue, while power marketing and brokering accounts for about 40%.
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms