April 2016, Vol. 243, No. 4


After 7-Year Run, Sequent Tops Tenaska Among Capacity Traders

Sequent Energy Management became the first capacity trader in seven years to beat out Tenaska in Capacity Center’s annual Top 20 report, as seven companies dropped out of the 2015 rankings altogether.

Houston-based Sequent, a subsidiary of AGL Resources, traded an average daily equivalent capacity volume of more than 5.8 Bcf/d to edge out No. 2 Tenaska (5.5 Bcf/d), data showed. However, at a total of 4,348 Bcf traded in 1,440, it more than doubled Tenaka’s 2,215 Bcf total over 308 deals.

“Sequent Energy has been consistent in its strategy for many years as a natural gas provider to power generators, utilities, industrials, and retail companies,” said Pete Tumminello, president of Sequent Energy Management.

“With the advance of shale, we have significantly expanded our ability to serve shale gas producers and help them optimize their natural gas transportation assets. Today we have grown to be the sixth-largest marketer of natural gas in the country, and with that growth we have added significant pipeline capacity to better serve the U.S. natural gas grid, which helped us obtain this number-one position. We plan to continue this growth by serving the expanding gas-fired power generation market, LNG export market, as well as the natural gas producers,” Tumminello told P&GJ.

Tumminello was named president of Sequent Energy Management in April 2010. He directs all aspects of Sequent’s operations, including natural gas asset management, origination, trading and producer services, and support functions. He also is responsible for developing and implementing long-term growth plans for Sequent.

Rounding out the Top 5 and repeating from last year’s listing were Houston-based Direct Energy at 3.2 Bcf/d and London-based BP at 2.6 Bcf/d traded. Moving up 22 spots for fifth was NRG, headquartered in West Windsor, NJ at 978 MMcf/d.

Capacity Center said data showed “not only did the number of deals increase year over year, but the deals became larger and longer in 2015 as compared to 2014.”

The West Peabody, MA consultancy firm noted that while EIA statistics showed daily production of gas reached 70 Bcf/d, Capacity Center statistics showed nearly 50% of this volume was flowing through the daily equivalent secondary market capacity during the first eight months of 2015. This is more than 300% higher than reported in 2009.

The market as a whole continued a trend toward greater concentration with 72% of daily equivalent capacity being traded by Top 20 companies, with the Top 5 companies accounting for 74% of capacity traded by the Top 20.

The number of capacity traders declined slightly from 430 in 2014 to 400, while Capacity Center said there was considerable “jockeying” for spots in the Top 20 as several companies experienced dramatic increases in business. Among those: Koch Industries, up 21 places to No. 8; ConocoPhillips  up 19 places to No. 12; Noble Energy up 32 places to No. 13; BNP Trading up 46 places to No. 14; EDF Trading up 9 places to No. 15; Texla up 18 places to No. 16.

Dropping out of the Top 20 listing from 2014 were Macquarie (formerly No. 11), Interstate Gas Supply (12), J Aron & Co. (13); SCANA (14), CenterPoint Unregulated (15), Equitable Unregulated (16) and Duke Energy Unregulated (20).

Capacity Center pointed out some stark differences among the leading traders with Sequent, primarily a wholesaler, acquiring 44% of its daily equivalent capacity from LDCs, 37% from producers-marketers and 18% from power generators. Meanwhile, Omaha, NB-based Tenaska, also primarily a wholesaler, obtained a whopping 80% of its capacity from producer-marketers, 17% from LDCs and only 3% from power generators.

Direct Energy, which serves as a marketer to commercial and industrial (C&I) customers acquired 72% of its capacity from LDCs, 27% from producer-marketers and 1% from power generators. BP, a wholesaler with some C&I business, obtained 53% of its capacity from producer-marketers, 44% from LDCs and 2% from end-users with their own transportation capacity.

Top 5 Pipelines

Based on Capacity Center data, four of the Top 5 natural gas pipelines “traded up” over 2014, with the other, Columbia Gas, remaining “essentially even.”

  • Transco, over 3.3 Bcf/d with nearly 2.5 Tcf traded, up from 2.4 Bcf/d and 1.7 Tcf total traded in 2014
  • Texas Eastern, 2.28 Bcf/d with 2.37 Tcf total traded, up from 1.9 Bcf/d and over 2.07 Tcf total traded in 2014
  • ANR Pipeline, 2.04 Bcf/d with 0.8 Tcf total traded, up from 0.95 Bcf/d and 0.39 Tcf total traded in 2014
  • Columbia Gas at 2 Bcf/d with 0.9 Tcf total traded, essentially even with 2.03 Bcf/d and 0.9 Tcf total traded during 2014
  • Rockies Express, moved up dramatically as the shippers on its east-to-west reversal primarily traded capacity to asset managers, accounting for 1.8 Bcf/d and 0.89 Tcf total traded. This was up from 0.16 Bcf/d and 0.12 Tcf total traded in 2014.

The Capacity Center said lists were based on deals done on all interstate pipelines between Jan. 1 and Aug. 31, 2015. Data excluded volumes due to acquisitions and between affiliates.

Looking Ahead

According to EIA’s short-term energy outlook, natural gas working inventories were slightly over a record 4 Tcf on Nov 20. The following week inventories were 16% higher than during the same week last year and 7% higher than the previous five-year average for the week.

EIA expects the Henry Hub natural gas spot price to average $2.47/MMBtu between October 2015 and March 2016, compared with $3.35/MMBtu for the same period last year.

Natural gas spot prices hit a 16-year low the week of Dec. 13, with the Henry Hub spot price settling at $1.65/ MMBtu at one point. Futures prices also settled at their lowest level since March 1999, with the near-month contract settling at $1.79/MMBtu.

Strong production growth and ample storage inventories have contributed to the recent low-price environment, as production hit three consecutive records in July, August, and September, EIA data showed.

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