The value of U.S. gas industry mergers and acquisitions has risen nearly fourfold this decade, to $39 billion in 1997 from $10.4 billion in 1990, the U.S. Energy Information Administration reports.
The increase parallels a surge in corporate combinations (mergers, acquisitions, joint ventures, and strategic alliances) across the U.S. energy sector, from $21.4 billion in 1990 to $106.4 billion in 1997, and then-with the announcement of such blockbuster mergers as British Petroleum plc with Amoco Corp. and Exxon Corp. with Mobil Corp.-to $220 billion in 1998.
Gas industry combinations
EIA said, "The growth in natural gas industry combinations does not indicate a decrease in competition. For example, between 1992 and 1997, the share of sales by the top four marketers declined by one-third to 21%, while their sales volumes more than doubled.
"(The share of) sales by the top 20 slipped only from 69% to 66%, but sales volumes more than tripled to 40 tcf."
It said the current wave of corporate combinations apparently will continue, as energy companies jockey for position worldwide, with both the number and size of combinations increasing.
EIA noted that combinations in the energy sector remained a relatively small part of corporate combinations in general in 1997, representing only about 11% of the total value of all combinations that year.
"Corporate combinations in the natural gas industry have become an integral part of the strategies developed to address changing conditions in the industry. Specific objectives behind the combinations vary, but many combinations share the goal of expanding beyond a single commodity or a single function to encompass a broad spectrum of energy sources, products, and services, thus becoming a 'one-stop energy center.'
"Corporate combinations remain under close scrutiny by both federal and state regulatory agencies, particularly to see whether the resulting entities would exert undue market power and to ensure benefits to consumers.
"Regulatory oversight of corporate combinations, particularly at the state level, often results in mandated savings, rate freezes, caps on the ability of the utilities to recover stranded costs, and other cost limitations and savings-sharing mechanisms, and consumers benefit, if savings are passed on to them."
Copyright 1999 Oil & Gas Journal. All Rights Reserved.
