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 2,500 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 36 employees and annual revenues of $68 million.
- About 2,500 local distribution establishments provide natural gas distribution services in the US and employ 113,800 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
Mar 22, 2024 - Producer Prices, Wages Drop
- Natural gas distributors’ wage and producer price growth are weakening. In the fourth quarter of 2023, producer prices for natural gas distributors fell sharply compared to the same time a year earlier, according to the Bureau of Labor Statistics (BLS). BLS data show that year-over-year wage growth in Q4 2023 was down slightly. However, producer prices declined twice as fast as wages, which may indicate increased pressure on natural gas distributors’ margins. Industry employment rose slightly in Q4 compared to the same period in 2022, according to the BLS.
- In March, 16 Republican-led states sued the Biden Administration after it moved in January to pause permits for any new or expanded liquified natural gas (LNG) export terminals, according to The New York Times. The administration says the pause in permitting is necessary pending more research about how LNG exports affect climate change, national security, and the US economy. The states contend that a pause of any length will be harmful to their economies and pose a potential long-term threat to US LNG exports to Europe. Despite a pause in permitting, the US remains the world’s largest exporter of natural gas, and export capacity is on track to double by 2027 as projects already permitted or under construction come online.
- In 2023, US intrastate natural gas pipeline expansions outpaced interstate additions, according to the US Energy Information Administration’s (EIA) Natural Gas Pipeline Projects Tracker. Intrastate pipelines, which only operate within the confines of a given state, added 5.2 billion cubic feet per day (Bcf/d) of capacity in 2023, primarily in Texas and Louisiana. Interstate pipelines, which cross state lines, had 0.9 Bcf/d of added capacity in 2023. Intrastate pipelines are growing to meet rising demand for natural gas in the Gulf Coast region, including by terminals that export liquified natural gas (LNG). Intrastate pipelines have grown to garner a larger share of overall expansions in recent years. In 2023, interstate projects accounted for 14% of pipeline capacity growth, compared to 65% in 2017.
- Amid high storage levels in Asia and Europe and a mild winter in the Northern Hemisphere, global natural gas and liquified natural gas (LNG) prices are expected to be weak in 2024, according to a January outlook by consultancy Wood Mackenzie. Europe’s natural gas demand is forecast to be flat in 2023 as more renewables come online and France increases nuclear capacity. Gas demand in Asia is projected to rise 5% in 2024 compared to the prior year but will remain below 2021 levels. The US is a key LNG supplier to both Asia and Europe but is more focused on the latter market following Russia’s invasion of Ukraine in early 2022, which led to a cutoff of European gas imports from Russia.
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