Natural Gas Distribution
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 2,400 natural gas local distributors in the US supply gas for residential usage, commercial usage, industrial usage, and electric power generation. The operations and financial performance of a natural gas distributor are highly dependent on the regulatory structure in which the company operates.
Industry size & Structure
A typical local distribution company has 48 employees and annual revenues of $73 million.
- About 2,400 local distribution establishments provide natural gas distribution services in the US and employ 114,000 workers.
- The natural gas distribution industry is concentrated with the 20 largest firms representing 64% of revenue.
- Large natural gas distribution firms include: ATMOS Energy, NiSource, New Jersey Resources, and Energy Transfer.
- Entry into the business is difficult as a built out pipeline infrastructure (valued in the billions of dollars), approval of the public utility commission, and a demonstrated competence in safety and environmental compliance is required to provide service.
Industry Forecast
Natural Gas Distribution Industry Growth
Recent Developments
Jul 23, 2024 - Mild Winters, Conservation Reduce Europe’s Natural Gas Consumption
- Conservation efforts and two consecutive mild winters have reduced Europe’s natural gas consumption, according to a July report by the US Energy Information Administration (EIA). In 2023, the European Union’s 23 member states’ natural gas consumption declined 18% compared to the previous five-year average, according to Eurostat. The EU’s gas consumption fell 19% in the first five months of 2024 compared to the average for the same months in 2017-2021. On April 1, 2024, Europe’s natural gas storage facilities were 59% full, marking the highest inventories on record at the end of a heating season, according to Gas Infrastructure Europe data. After Russia invaded Ukraine, the EU moved to reduce Russian gas imports, which were down 89% in 2023 compared to 2021. The EU has primarily replaced Russian gas with liquified natural gas (LNG) imports, about half of which come from the US.
- In mid-July, pipeline operator Energy Transfer completed its $2.2 billion acquisition of WTG Midstream Holdings. The deal boosts Energy Transfer’s operations in the Permian Basin by adding 6,000 miles of gas gathering pipelines. The acquisition also includes eight gas processing plants and two more that are under construction, as well as a 20% stake in the 425-mile BANGL natural gas pipeline that connects the Permian Basin to energy markets on the Texas Coast. The deal is expected to boost Energy Transfer’s revenues from the gathering, processing, and downstream transportation of the rising volumes of natural gas and natural gas liquids (NGLs) coming out of the Permian Basin.
- The AI boom is expected to trigger a significant uptick in demand for electricity after a decade of flat consumption growth, according to CNBC. The accelerating power needs of data centers, AI, and an electrifying automobile fleet could boost electricity demand by as much as 20% by 2030, according to a forecast by Wells Fargo. Data centers could account for as much as 8% of total US electricity consumption by 2030, according to Goldman Sachs. Energy sector observers suggest that renewables cannot ramp up quickly enough to meet the growing hunger for power and that natural gas-fired plants will help shore up the electricity supply. Because they’re not reliant on weather, natural gas and nuclear power are better able to respond quickly to sudden surges in electricity demand. Goldman Sachs forecasts that natural gas will supply 60% of power demand growth from data centers and AI, and renewables will power 40%.
- In May, amid rising demand for electricity, the Federal Energy Regulatory Commission (FERC) approved two new rules aimed at streamlining the process of building the large transmission lines that are needed to bring more power to the US grid, according to The Wall Street Journal. The first rule will require power producers and transmitters to apply a 20-year scope in their forecasts for electricity supply and demand shifts. The planning rule also urges utilities to implement grid-enhancement technologies, including power flow control devices and sensors, which can make transmission on existing lines more efficient. The second rule deals with permitting changes for new transmission lines to clear bottlenecks that have kept new renewable energy sources from hooking up to the grid. In 2023, the backlog of new power projects waiting to connect to the grid – mainly wind, solar, and battery storage – grew by 30% compared to 2022, according to Lawrence Berkeley National Laboratory. The new transmission line rule favors projects that benefit electricity consumers and adjusts cost allocation for projects spanning multiple states.
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