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An Overview of the Natural Gas Compression Industry

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Sep. 1 2020, Updated 11:22 a.m. ET

Why is natural gas compression important?

Natural gas compression is essential for transporting natural gas. Compression is used several times during the natural gas production and transportation cycle. It’s used to get natural gas from low-pressure wells to gathering systems. Then it’s used during transport from gathering systems to storage or the end user.

Natural gas compression is also used in natural gas storage projects for injection and withdrawals during the normal operational cycles. Compression services are also used for compression applications in refineries and petrochemical plants.

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Natural gas compression industry

Natural gas producers usually outsource their compression services due to the benefits and flexibility of contract compression.

Companies that offer natural gas compression services, among other services, include Access Midstream Partners that merged into Williams Companies (WPZ) and Regency Energy Partners (RGP), which is to be merged into Energy Transfer Partners (ETP).

According to Exterran Partners (EXLP), outsourcing compression operations to compression service providers presents the following benefits:

  • “The ability to efficiently meet their changing compression needs over time while limiting the underutilization of their owned compression equipment.
  • Access to the compression service provider’s specialized personnel and technical skills.
  • The ability to increase their profitability by transporting or producing a higher volume of natural gas through decreased compression downtime and reduced operating, maintenance, and equipment costs by allowing the compression service provider to efficiently manage their compression needs; and
  • The flexibility to deploy their capital on projects more directly related to their primary business by reducing their compression equipment and maintenance capital requirements.”

EXLP is a subsidiary company of Exterran Holdings, Inc. (EXH), which makes up ~0.11% of the Vanguard Energy ETF (VDE).

In the following part, we’ll look at what drives natural gas compression services.

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