An increase in transactions occurred during a revival in U.S. natural gas production, with annual marketed production increasing 28 percent from 2005 to 2011.
This increase is a result of the development and expansion of shale natural gas production, which the Energy Information Administration (EIA) predicts will increase from 23 to 49 percent of U.S. natural gas production during the next 25 years.
“This detailed analysis provides insight into the increasingly important, over-the-counter physical market for natural gas in the United States,” said Greg Leonard, vice president of Cornerstone Research. “As natural gas production expands, the industry remains unconcentrated with the top 20 companies’ accounting for slightly more than half of the transaction volume.”
· The U.S. natural gas industry is not concentrated with a large number of diverse participants. The top 20 transacting companies by volume account for slightly more than half the transaction volume covered by the Form 552 submissions. Traders or wholesale marketers continued to report the largest transaction volumes, accounting for some 41 percent of transactions.
· The share of transactions based on index prices increased modestly from some 69 percent in 2008 to 72 percent in 2011. The index-setting, fixed-price natural gas transactions account for a quarter of the volume of index-based natural gas transactions, which has remained relatively stable.
· The 2011 proportion of net buyers’ and net sellers’ reporting to the price index publishers did not remain stable in 2011; for the first time in the past four years, the proportion has departed from a relatively equal division. In 2011, net buyers reported 58 percent of transactions, whereas net sellers reported 37 percent of transactions.
· A comparison of fixed-price physical transactions reported by the company-level Form 552 submissions and hub-level IntercontinentalExchange Inc. (ICE) data shows fixed-price physical transactions reported by ICE from 2008 to 2011 represent some 70 percent of the Form 552 volume. The top quartile of North American natural gas hubs reported by ICE has 29 times the average daily day-ahead volume and 46 times the average monthly month-ahead volume of the bottom quartile of hubs.