UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549
                                  FORM 10-K

(Mark One)
          
[ X ]  Annual Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934
       For the fiscal year ended December 31, 1998
       or
[   ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934
       For the transition period from            to            

Commission file number 1-7297

                                  NICOR INC.                    
             (Exact name of registrant as specified in its charter)
          
                 Illinois                                     36-2855175     
     (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                      Identification No.)
                 
             1844 Ferry Road                                                   
           Naperville, Illinois                                60563-9600   
  (Address of principal executive offices)                     (Zip Code)     
      
Registrant's telephone number, including area code:  (630) 305-9500

Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of each exchange on
           Title of each class                            which registered    
Common Stock, par value $2.50 per share,              New York Stock Exchange
including Preference Stock purchase rights            Chicago Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No    
 
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  [ X ]

As of February 28, 1999, 47,473,776 common shares were outstanding.  The
aggregate market value of voting securities held by non-affiliates of the
registrant was approximately $1.8 billion.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the company's 1999 Annual Meeting Definitive Proxy Statement,
dated March 5, 1999, are incorporated by reference into Part III.





Nicor Inc.                                                            Page i

Table of Contents

Item No.                                                                 Page

             Part I
    1.       Business................................................       1
    2.       Properties..............................................       5
    3.       Legal Proceedings.......................................       5
    4.       Submission of Matters to a Vote of Security Holders.....       5
             Executive Officers of the Registrant....................       6

             Part II
    5.       Market for Registrant's Common Equity and Related
               Stockholder Matters...................................       7
    6.       Selected Financial Data.................................       8
    7.       Management's Discussion and Analysis of Financial 
               Condition and Results of Operations...................       9
   7A.       Quantitative and Qualitative Disclosures About
               Market Risk...........................................      20
    8.       Financial Statements and Supplementary Data.............      21
    9.       Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure...................      39

             Part III
   10.       Directors and Executive Officers of the Registrant......      39
   11.       Executive Compensation..................................      39
   12.       Security Ownership of Certain Beneficial Owners
               and Management........................................      39
   13.       Certain Relationships and Related Transactions..........      39

             Part IV
   14.       Exhibits, Financial Statement Schedules, and Reports
               on Form 8-K...........................................      39
             Signatures..............................................      41
             Exhibit Index...........................................      42


Glossary

Cogeneration - Simultaneous production of electricity and heat from a single 
               fuel, such as natural gas.
Degree day - The extent to which the daily average temperature falls below
             65 degrees Fahrenheit.
FERC - Federal Energy Regulatory Commission.
ICC - Illinois Commerce Commission.
Mcf, Bcf - Thousand cubic feet, billion cubic feet.
TEU - Twenty-foot equivalent unit.




Nicor Inc.                                                            Page 1

PART I

Item 1.   Business

Nicor Inc. (Nicor), incorporated in 1976, is a holding company.  Its
principal subsidiaries are Northern Illinois Gas Company (doing business as
Nicor Gas Company), one of the nation's largest natural gas distribution
companies, and Tropical Shipping, a transporter of containerized freight in
the Caribbean.  Gas distribution is Nicor's primary business, representing
approximately 90 percent of consolidated operating income and assets.  Nicor
also owns several energy-related subsidiaries and is a partner in Nicor
Energy, a provider of unregulated energy products and services.  Nicor had
approximately 3,300 employees at year-end 1998.

Financial information on Nicor's major business segments is included in
Business Segment and Geographic Information beginning on page 35.  Certain
terms used herein are defined in the Glossary on page i.

GAS DISTRIBUTION

General

Nicor Gas delivers natural gas to 1.9 million customers, including
transportation service, gas storage and gas supply backup to approximately
40,000 commercial and industrial customers who purchase their own gas
supplies.  The company's service territory encompasses most of the northern
third of Illinois, excluding the city of Chicago.  Nicor Gas maintains
franchise agreements with most of the communities it serves, allowing it to
construct, operate and maintain distribution facilities in those
communities.  Franchise agreement terms range up to 50 years.  Currently, 
5 percent of the agreements will expire in five years or less.  The company
has approximately 2,200 employees.

Nicor Gas' service territory is diverse and has grown steadily over the
years, providing the company with a well-balanced mix of residential,
commercial and industrial customers.  In 1998, residential customers
accounted for about 40 percent of natural gas deliveries, while commercial
and industrial customers accounted for about 25 percent and 35 percent,
respectively.  In addition, the company's industrial and commercial customer
base is well diversified, lessening the impact of industry-specific economic
swings.  See Gas Distribution Statistics on page 15 for operating revenues,
deliveries and customers by customer classification.

Gas deliveries are seasonal since about one-half are used for space heating. 
Typically, 70 percent to 75 percent of deliveries and revenues occur from
October through March.

Customer Services

In addition to gas sales to all customer classes, Nicor Gas provides
transportation service to commercial and industrial customers who purchase
their own gas supplies.  Beginning in 1999, the company's Customer Select
test program will allow 80,000 residential customers to select their natural
gas supplier.  Additional information on the test program is presented in 




Nicor Inc.                                                            Page 2

Item 1.   Business (continued)

Factors Affecting Business Performance beginning on page 13.  Transportation
customers have options that include use of the company's storage system, the
choice of individual or group billing, and the ability to choose varying
supply backup levels and service options.  The company receives a margin
generally comparable to gas sales for transportation service with full
supply backup.

In recent years, Nicor Gas has been pursuing several nontraditional
activities.  These activities include finding innovative ways to utilize its
physical assets by providing natural gas storage and intrastate
transportation services to marketers, interstate pipelines and neighboring
gas distribution companies.

Sources of Gas Supply

Nicor Gas purchases gas supplies on a deregulated basis directly from
producers and marketers.  Pipeline transportation and purchased storage
services are contracted for at rates regulated by the FERC.  Firm pipeline
capacity and purchased storage services held by the company that are
temporarily not needed can be released in the secondary market under FERC-
mandated capacity release provisions, with proceeds reducing the company's
cost of gas charged to customers.

The company's peak day requirements are met through utilization of company-
owned storage facilities, firm pipeline capacity, purchased storage services
and other supply arrangements.  Nicor Gas has been able to obtain sufficient
supplies of natural gas to meet customer requirements.  The company believes
natural gas supply availability will be sufficient to meet market demands in
the foreseeable future.

Gas supply.  Nicor Gas maintains a diversified portfolio of gas supply
contracts.  Firm gas supply contracts are diversified by supplier, producing
region, quantity and available transportation.  Contract pricing is
generally tied to published price indices so as to approximate current
market prices.  The contracts also generally provide for the payment of
fixed demand charges to ensure the availability of supplies on any given day
and are generally negotiated annually.

The company also purchases gas supplies on the spot market to fulfill its
supply requirements or to take advantage of favorable short-term pricing. 
Spot gas purchases accounted for about one-half of the company's total gas
purchases in the last three years.

Customers served under the company's transportation service tariffs purchase
their own gas supplies.  About one-half of the gas that the company
delivered in 1998 was purchased by transportation customers directly from
producers and marketers rather than from the company.

Pipeline transportation.  Nicor Gas is directly connected to six interstate
pipelines which provide access to most of the major natural gas producing
regions in North America.  The company's primary firm transportation
contracts are with:  Natural Gas Pipeline Company of America, which accounts
for about two-thirds of the contracted capacity, Midwestern Gas Transmission




Nicor Inc.                                                            Page 3

Item 1.   Business (continued)

Company and Northern Natural Gas Company.  Nearly all of the contracted
capacity will expire in the year 2000.

Storage.  Nicor Gas owns and operates seven underground gas storage
facilities.  This storage system is one of the largest in the gas
distribution industry and is designed to meet about 55 percent of the
company's peak day deliveries and approximately 30 percent of its normal
winter deliveries.  On an annual basis, the company cycles about 130 Bcf of
gas through its storage fields.  In addition to the company-owned
facilities, Nicor Gas purchases about 40 Bcf of storage service.  Storage
provides supply flexibility, improves reliability of deliveries and reduces
costs.

Competition/Demand

Nicor Gas is one of the largest utility energy suppliers in Illinois,
delivering about one-third of all utility energy consumed in the state. 
About 95 percent of all single-family homes in Nicor Gas' service territory
are heated with natural gas.  The company's gas services compete with other
forms of energy, such as electricity and oil, based on such factors as
price, service and reliability.  Significant factors that impact demand for
natural gas include weather, economic conditions and the price of gas
relative to competitive fuels. 

The energy industry has undergone fundamental changes over the past several
years.  In 1997, Illinois adopted legislation directing the process of
deregulating the state's electric utility industry.  Although Nicor Gas'
traditional pricing advantage compared to electricity may decrease as the
price of electricity declines, the company expects to maintain a pricing
advantage in the foreseeable future.

Additional information on competition and demand is presented in Factors
Affecting Business Performance beginning on page 13.

Regulation

Nicor Gas is regulated by the ICC, which establishes the rules and
regulations governing utility rates and services in Illinois.  Rates are
designed to allow the company to recover its costs and provide an
opportunity to earn a fair return for its investors.  Changes in the
regulatory environment could affect the longer-term performance of Nicor
Gas.

The cost of gas the company purchases for customers is recovered through a
monthly gas supply charge, which accounts for approximately 70 percent of a
typical residential customer's annual bill.  Currently, the company's cost
of gas is passed on to the customer without markup.

In March 1999, Nicor Gas filed a performance-based rate plan for natural gas
supply costs with the ICC.  The plan involves comparing the company's actual





Nicor Inc.                                                            Page 4

Item 1.   Business (continued)

natural gas supply costs to a market-based benchmark, and any difference
would be shared between Nicor Gas and its customers.  The company expects an
ICC ruling on its filing in the fourth quarter of 1999 with an effective
date of January 1, 2000, if the proposal is approved by the ICC in a manner
acceptable to the company.

In 1997, the ICC approved Nicor Gas' plans for a three-year test program 
called Customer Select that will give more customers the opportunity to
choose their natural gas supplier.  This program was launched in 1998. 
Additional information on the test program is presented in Factors Affecting
Business Performance beginning on page 13.

Properties

The gas distribution, transmission and storage system includes approximately
29,000 miles of steel, plastic and cast iron main; approximately 26,000
miles of steel, plastic/aluminum composite, plastic and copper service pipe
connecting the mains to customers' premises; and seven underground storage
fields.  Other properties include buildings, land, motor vehicles, meters,
regulators, compressors, construction equipment, tools, communication and
computer equipment, software and office equipment.

The principal real properties are held under easements, permits, licenses or
in fee.  Land in fee is owned for essentially all administrative offices and
for certain transmission mains and underground storage fields.  Substantial-
ly all properties are subject to the lien of the indenture securing the
company's first mortgage bonds.

SHIPPING

Tropical Shipping is one of the largest containerized cargo carriers in the
Caribbean, a region which is characterized by modest market growth and
intensifying competition.  Tropical Shipping's financial results can be
significantly affected by general economic conditions in the United States
and the Caribbean.  The company's shipments consist primarily of southbound
cargo such as building materials, food and other necessities for developers,
manufacturers and residents in the Caribbean, as well as tourist-related
shipments intended for use by hotels, resorts and cruise ships.  The balance
of Tropical Shipping's cargo consists of northbound shipments of
agricultural products and apparel and interisland shipments.  The company
also provides additional related services including inland transportation
and cargo insurance.

Tropical Shipping's owned fleet consists of 13 vessels with a container
capacity totaling approximately 3,100 TEUs.  Whenever practical, excess
capacity in Tropical Shipping's fleet is chartered out on a short-term
basis.  In addition, the company owns containers, container-handling
equipment, 




Nicor Inc.                                                            Page 5

Item 1.   Business (concluded)

chassis and other equipment.  Real property, a significant portion of which
is leased, includes office buildings, cargo handling facilities and
warehouses located in the United States, as well as in some of the ports
served.

Additional information about Tropical Shipping's business is presented in
Factors Affecting Business Performance beginning on page 13.

OTHER NICOR VENTURES

Nicor is continually looking for opportunities to provide products and
services that will meet customers' energy needs.  Additional information
pertaining to these ventures is presented in Factors Affecting Business
Performance beginning on page 13.

ENVIRONMENTAL MATTERS

For information on environmental matters, see Contingencies on page 37.

Item 2.   Properties

Information with respect to this item concerning Nicor and its major
subsidiaries' properties is included in Item 1, Business, above, and is
incorporated herein by reference.  These properties are suitable, adequate
and utilized in the company's operations.

Item 3.  Legal Proceedings

For information concerning legal proceedings, see Contingencies on page 37
and Regulation beginning on page 3, which are incorporated herein by
reference.

Item 4.  Submission of Matters to a Vote of Security Holders

None.




Nicor Inc.                                                            Page 6

Executive Officers of the Registrant

Executive officers of the company are elected annually by the Board of
Directors.

         Name               Age             Current Position and Background     

Thomas L. Fisher             54     Chairman, Nicor and Nicor Gas (since 1996);
                                    Chief Executive Officer, Nicor (since 1995)
                                    and Nicor Gas (since 1988); President, Nicor
                                    (since 1994) and Nicor Gas (since 1988); and
                                    Chief Operating Officer, Nicor (1994).

Philip S. Cali               51     Senior Vice President Operations, Nicor Gas
                                    (since 1995); Vice President Engineering,
                                    Codes and Environmental Affairs, Nicor Gas
                                    (1994-1995); and Vice President New Business
                                    Development, Costain Holdings Inc. (company
                                    engaged in natural resource development)
                                    (1987-1994).

David L. Cyranoski           55     Senior Vice President, Nicor and Nicor Gas
                                    (since 1995); Secretary, Nicor (since 1992)
                                    and Nicor Gas (since 1993); Treasurer, Nicor
                                    and Nicor Gas (since 1998); Controller,
                                    Nicor (1992-1998) and Nicor Gas (1984-1998);
                                    and Vice President, Nicor (1992-1995) and
                                    Nicor Gas (1984-1995).

Kathleen L. Halloran         46     Senior Vice President Administration, Nicor
                                    Gas (since 1998); Senior Vice President
                                    Information Services, Rates and Human
                                    Resources, Nicor Gas (1996-1998); Vice
                                    President Information Services, Rates and
                                    Human Resources, Nicor Gas (1995-1996); Vice
                                    President Information Services and Rates,
                                    Nicor Gas (1994-1995); and Vice President
                                    Information Services and General Accounting,
                                    Nicor Gas (1992-1994).

Thomas A. Nardi              44     Senior Vice President Nonutility Operations
                                    and Business Development, Nicor (since
                                    1995); Senior Vice President Business
                                    Development, Nicor Gas (since 1995); Vice
                                    President Business Development, Nicor (1994-
                                    1995); Vice President Supply and Business
                                    Development, Nicor Gas (1994-1995); and Vice
                                    President Rates and Supply, Nicor Gas
                                    (1993-1994).

George M. Behrens            43     Vice President and Controller, Nicor and
                                    Nicor Gas (since 1998); Vice President
                                    Accounting, Nicor Gas (1996-1998); and Vice
                                    President and Treasurer, Tropical Shipping
                                    (1991-1996).




Nicor Inc.                                                            Page 7

Executive Officers of the Registrant (concluded)

         Name               Age             Current Position and Background     

Claudia J. Colalillo         49     Vice President Human Resources, Nicor and 
                                    Nicor Gas (since 1998); Senior Vice
                                    President Organizational Development,
                                    May & Speh, Inc. (provider of technology-
                                    based information management services) (1995
                                    -1998); and Vice President Human Resources,
                                    May & Speh, Inc. (1992-1995).

Daniel R. Dodge              45     Vice President Business Development, Nicor
                                    and Nicor Gas (since 1998); and Vice
                                    President Business and Asset Development,
                                    MidCon Corp. (diversified energy company
                                    with gas pipeline and power marketing
                                    operations) (1994-1998).

Edwin M. Werneke             60     Vice President Supply Ventures, Nicor (since
                                    1995) and Nicor Gas (since 1996); Vice
                                    President Supply Administration, Nicor Gas
                                    (1995); and Assistant Vice President, Nicor
                                    Gas (1980-1995).


PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters

Nicor common stock is listed on the New York and Chicago Stock Exchanges. 
At February 28, 1999, there were approximately 34,000 common stockholders of
record.  On March 9, 1999, the Board of Directors declared a quarterly
common stock dividend of 39 cents per share, payable May 1, 1999, to
stockholders of record March 31, 1999.  This payment represents an annual
rate of $1.56 per share.

The common stock price range and dividends declared per common share by
quarter for 1998 and 1997, are as follows:

                               Stock price           Dividends
             Quarter         High        Low          declared
            1998
              First       $43-3/8     $38-7/8        $     .37 
              Second       43-3/16     37-1/2              .37        
              Third        41-15/16    37-1/8              .37  
              Fourth       44-7/16     40-3/8              .37
               
            1997
              First       $37         $31-7/8        $     .35
              Second       36-3/4      30                  .35
              Third        38-3/8      35                  .35
              Fourth       42-15/16    36-1/16             .35

                 
               

<TABLE>
Nicor Inc.                                                                                            Page  8

Item 6.  Selected Financial Data
<CAPTION>
                                                             Year Ended December 31                  
(millions, except per share data)            1998           1997           1996           1995           1994  

<S>                                       <C>            <C>            <C>            <C>            <C>
Operating revenues                        $ 1,465.1      $ 1,992.6      $ 1,850.7      $ 1,480.1      $ 1,609.4  
Operating income                          $   208.6      $   229.8      $   233.1      $   189.8      $   189.5  
Net income                                
  Continuing operations                   $   116.4      $   127.9      $   121.2      $    99.8      $   109.5
  Discontinued operations                         -              -           15.0              -              -
                                          $   116.4      $   127.9      $   136.2      $    99.8      $   109.5  
Basic earnings per common share
  Continuing operations                   $    2.43      $    2.62      $    2.42      $    1.96      $    2.07
  Discontinued operations                         -              -            .30              -              -
                                          $    2.43      $    2.62      $    2.72      $    1.96      $    2.07  
Diluted earnings per common share
  Continuing operations                   $    2.42      $    2.61      $    2.41      $    1.96      $    2.07
  Discontinued operations                         -              -            .30              -              -
                                          $    2.42      $    2.61      $    2.71      $    1.96      $    2.07  
Dividends declared per
  common share                            $    1.48      $    1.40      $    1.32      $    1.28      $    1.26

Property, plant and equipment
  Gross                                   $ 3,379.8      $ 3,267.7      $ 3,192.7      $ 3,110.4      $ 2,951.5
  Net                                       1,731.8        1,735.8        1,771.9        1,779.3        1,717.0  
Total assets                              $ 2,364.6      $ 2,394.6      $ 2,438.6      $ 2,259.1      $ 2,209.9  
Capitalization
  Long-term debt                          $   557.3      $   550.2      $   518.0      $   468.7      $   458.9
  Redeemable preferred stock                    6.3            6.4            7.5            8.9            9.4

  Common equity                               759.0          744.0          729.6          687.6          683.4  
                                          $ 1,322.6      $ 1,300.6      $ 1,255.1      $ 1,165.2      $ 1,151.7      
</TABLE>




Nicor Inc.                                                            Page 9

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations

The purpose of this financial review is to explain changes in Nicor's
operating results and financial condition from 1996 to 1998.  This review
also discusses business trends and uncertainties that might affect Nicor.  A
summary of operating performance during this period is presented below,
followed by a more detailed discussion.  Certain terms used herein are
defined in the Glossary on page i.

SUMMARY

Nicor's two major business segments are gas distribution and shipping.  Gas
distribution is Nicor's primary business, representing approximately 90
percent of consolidated operating income and assets. 

Nicor's 1998 income from continuing operations of $116.4 million decreased
$11.5 million from 1997 due to the adverse impact of unusually warm weather. 
Positive factors included a reduction in operating and maintenance expenses
in the gas distribution segment and improved operating results in the
shipping segment.  In 1997, Nicor's income from continuing operations of
$127.9 million increased $6.7 million from 1996 due to nonoperating factors
and improved operating results in the shipping segment.

Diluted earnings per common share from continuing operations decreased $.19
in 1998 to $2.42 and increased $.20 in 1997 to $2.61.  Per share results in
each period benefited from the company's common stock repurchase programs.

Operating income (loss) for the years ended December 31 by major business
segment was:

(millions)                            1998            1997             1996  
Gas distribution                  $   185.5       $   210.1        $   215.6
Shipping                               27.6            25.3             22.2
Corporate and other                    (4.5)           (5.6)            (4.7)
                                  $   208.6       $   229.8        $   233.1

The following summarizes operating income comparisons for major business
segments:

-  Gas distribution operating income decreased $24.6 million in 1998           
   due to the adverse impact of weather that was 23 percent warmer than the    
   prior year, partially offset by a 4 percent reduction in operating and      
   maintenance expenses.  In 1997, gas distribution operating income           
   decreased $5.5 million.  Factors contributing to the decrease included      
   lower deliveries, due partially to the impact of weather that was 3         
   percent warmer than the prior year, and the carryover impact of rate 
   design changes and a depreciation rate increase.  A significant positive
   contribution to 1997 operating income resulted from a 4 percent 
   reduction in operating and maintenance expenses.




Nicor Inc.                                                           Page 10

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

-  Shipping operating income rose $2.3 million in 1998 to a record $27.6
   million due to a 4 percent increase in volumes shipped and higher 
   average rates.  In 1997, shipping operating income rose $3.1 million due 
   to a 16 percent increase in volumes shipped and improved utilization of  
   vessels and equipment.

RESULTS OF OPERATIONS

Details of various financial and operating information by segment can be
found in the tables throughout this review.  The following discussion
summarizes the major items impacting Nicor's earnings.

Operating revenues.  Operating revenues for the years ended December 31 by
major business segment were:

(millions)                              1998            1997             1996  
Gas distribution                     $ 1,229.0       $ 1,730.5        $ 1,610.2
Shipping                                 224.5           213.1            195.0
Corporate and other                       11.6            49.0             45.5
                                     $ 1,465.1       $ 1,992.6        $ 1,850.7

Nicor's operating revenues decreased $527.5 million in 1998.  Gas
distribution revenues were down significantly from the prior year due
principally to lower natural gas supply costs, which are passed directly 
through to customers, and lower deliveries of natural gas related to the
warmer weather. Shipping revenues rose 5 percent due to additional volumes
shipped and higher average rates.  In 1997, Nicor's operating revenues
increased $141.9 million.  Gas distribution revenues were up 7 percent from
the prior year because of higher natural gas supply costs.  Shipping
revenues rose 9 percent as a result of additional volumes shipped.  

Gas distribution margin.  Gas distribution margin, defined as operating
revenues less cost of gas and revenue taxes, which are both passed directly
through to customers, and margin per Mcf delivered are shown in the
following table for the years ended December 31:

                                     1998            1997             1996  
Margin (millions)                $   469.4       $   496.0        $   502.5
Margin per Mcf delivered               .96             .91              .90

Gas distribution margin declined $26.6 million in 1998 due to the negative
impact of warmer weather.  In 1997, margin declined $6.5 million due to
warmer weather and the carryover impact of rate design changes.  Margin per
Mcf delivered increased in 1998 as lower-margin deliveries declined as a
result of warmer weather.
 




Nicor Inc.                                                           Page 11

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Operating and maintenance.  In 1998, operating and maintenance expenses
decreased $2.3 million to $338 million despite 5 percent higher costs in the
shipping segment relating to an increase in volumes shipped.  Lower
retirement-benefits costs in the gas distribution segment, resulting
principally from favorable pension fund investment returns, contributed to
the overall decrease in operating and maintenance expenses.  In 1997,
operating and maintenance expenses increased $13.6 million to $340.3 million
due primarily to higher costs in the shipping segment caused principally by
increased volumes, which more than offset lower costs in the gas
distribution segment.  Operating and maintenance costs in the gas
distribution segment decreased 4 percent due, in part, to lower payroll and
retirement-benefits costs, which more than offset a higher provision for
uncollectible accounts.  Favorable pension fund investment returns
contributed to the reduction in retirement-benefits costs.

Depreciation.  Depreciation increased 4 percent in 1998 to $136.5 million
due primarily to gas plant additions.  In 1997, depreciation rose 5 percent
to $131.2 million due to the change in the gas distribution composite
depreciation rate and gas plant additions.  For further information on the
change in the composite depreciation rate, see Accounting Policies on 
page 28.

Nonoperating items.  In 1997, other income increased $12.6 million to $16.2
million due primarily to a change in interest on income tax matters and
gains from property sales.  The company continues to assess its nonstrategic
real estate holdings, and is evaluating the potential to maximize the value
of these holdings through additional property sales or development over the
next several years.

Interest expense decreased $2.5 million in 1998 to $46.6 million due
primarily to lower interest rates and decreased average borrowing levels.

Discontinued operations.  In 1996, the company made a positive after-tax
adjustment of $15 million to its reserve for discontinued operations.  For
further information on this adjustment, see Discontinued Operations on 
page 31.

FINANCIAL CONDITION AND LIQUIDITY

The company believes it has access to adequate resources to meet planned
capital expenditures, debt and stock redemptions, dividend payments and
working capital needs.  These resources include net cash flow from operating
activities, access to capital markets, unused lines of credit and short-term
investments.

Operating.  Net cash flow from operating activities increased $157.3 million
in 1998 to $368.4 million and more than doubled in 1997 to $211.1 million
due primarily to changes in working capital items in the gas distribution
segment.  Working capital can swing sharply due primarily to certain gas
distribution factors including weather, the price of gas, the timing of
collections from customers and gas purchasing practices.  The company
generally relies on short-term financing to meet temporary increases in
working capital needs.




Nicor Inc.                                                           Page 12

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Investing.  Capital expenditures for the years ended December 31 by major
business segment are presented below:
<TABLE>
<CAPTION>
   
                               Estimated       
(millions)                        1999            1998            1997             1996   
<S>                            <C>   <C>       <C> <C>         <C> <C>          <C> <C>
Gas distribution               $     130       $   112.6       $   101.8        $   107.7
Shipping                              40            23.3            10.9             11.2
Corporate and other                    -              .3              .3              1.0
                               $     170       $   136.2       $   113.0        $   119.9
</TABLE>

Gas distribution capital expenditures in 1998 were higher than the prior
year due largely to expenditures for information technology.  The increase
in 1998 capital spending in the shipping segment related primarily to the
replacement of existing leased equipment.

Capital spending in 1999 in the gas distribution segment is projected to
increase to about $130 million due primarily to additional expenditures for
information technology.  The projected increase in 1999 capital expenditures
in the shipping segment relates to the construction of a warehouse and
progress payments on the construction of two vessels.

During 1998, the company expanded its cargo container leasing investment by
$15 million and invested an additional $8 million in affordable housing tax
credit funds.  In 1997, Nicor invested $8 million in cargo container leasing
and $7 million in affordable housing tax credit funds. 

In January 1999, Nicor and Houston-based Dynegy Inc. announced plans to
build a 250-megawatt, natural gas-powered electric generation plant at a
cost of $70 million to $80 million.  Nicor has a 50 percent equity
interest in this project.  The plant, which will be located in northern
Illinois, is expected to be in service this summer and will use natural gas
delivered through Nicor Gas' system to generate electricity that will
provide more reliable electric service during high-demand periods.

Financing.  Nicor's long-term debt as a percent of capitalization was 42.1
percent, 42.3 percent and 41.3 percent at year-end 1998, 1997 and 1996,
respectively.

Long-term debt. Nicor Gas has $250 million of First Mortgage Bonds remaining
available for issuance under a December 1998 shelf registration filing.  Net
proceeds from securities issued are typically used for the refinancing of
certain outstanding First Mortgage Bonds, for construction programs to the
extent not provided by internally generated funds and for general corporate
purposes.

In January 1999, Nicor Gas agreed to sell $50 million of First Mortgage
Bonds at 5.37% due in 2009 and $50 million of unsecured notes at 5.065% due
in 2000 to fund the redemption of First Mortgage Bonds as follows: $50
million at 5.875% due in 2000 and $50 million at 7.375% due in 2023.




Nicor Inc.                                                           Page 13

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

During 1998, Nicor Gas issued First Mortgage Bonds as follows: $50 million
at 5.75% due in 2003 and $50 million at 6.58% due in 2028.  Redemptions of
First Mortgage Bonds during 1998 were as follows: $25 million at 5.875% due
in 1998, $25 million at 6.25% due in 1999 and $75 million at 8.25% due in
2022.

In 1997, Nicor Gas issued First Mortgage Bonds as follows: $50 million at
6.75% due in 2002 and $50 million at 7.375% due in 2027.  Redemptions of
First Mortgage Bonds during 1997 were as follows: $25 million at 5.5% due in
1997 and $50 million at 9% due in 2019. 

During 1996, Nicor Gas issued $75 million of First Mortgage Bonds at 6.45%
due in 2001 and redeemed $50 million of First Mortgage Bonds at 4.5% due in
1996. 

Short-term debt.  Nicor and its gas distribution subsidiary maintain
short-term credit agreements with major domestic and foreign banks.  At
December 31, 1998, these agreements, which serve as backup for the issuance
of commercial paper, totaled $280 million.  The company had $234.5 million
and $278.9 million of commercial paper outstanding at year-end 1998 and
1997, respectively. 

Common stock.  Through common stock repurchase programs, Nicor has purchased
and retired .7 million, 1.3 million and .8 million shares in 1998, 1997 and
1996, respectively, at a cost of $28 million, $45 million and $26 million. 
These repurchases were financed in large part by cash flow from operations.
At December 31, 1998, approximately $5 million remained authorized for the
repurchase of common stock under an existing program.

Nicor increased its quarterly common stock dividend rate during 1998 for the
eleventh consecutive year.  The company paid dividends of $70 million, $67.5
million and $65.6 million in 1998, 1997 and 1996, respectively.

Other.  Restrictions imposed by regulatory agencies and loan agreements
limiting the amount of subsidiary net assets that can be transferred to
Nicor are not expected to have a material impact on the company's ability to
meet its cash obligations.

FACTORS AFFECTING BUSINESS PERFORMANCE

The following factors can impact year-to-year comparisons and may affect the
future performance of Nicor's businesses.

Gas distribution.  Nicor Gas serves 1.9 million customers in a service
territory that encompasses most of the northern third of Illinois, excluding
the city of Chicago.  The region's economy is diverse and has grown steadily
over the years, providing Nicor Gas with a well-balanced mix of residential,
commercial and industrial customers.  In 1998, residential customers
accounted for about 40 percent of natural gas deliveries, while commercial
and industrial customers accounted for about 25 percent and 35 percent,
respectively.




Nicor Inc.                                                           Page 14

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Since about one-half of gas deliveries are used for space heating,
fluctuations in weather can have a significant impact on year-to-year
comparisons of operating income and cash flow.  In addition, significant
changes in gas prices or economic conditions can impact gas usage.  However,
Nicor Gas' large residential customer base provides relative stability
during weak economic periods.  Also, the industrial and commercial customer
base is well diversified, lessening the impact of industry-specific economic
swings.

Nicor Gas competes with other energy suppliers based on such factors as
price, service and reliability.  The company is well positioned to deal with
the possibility of fuel switching by customers because it has rates and
services designed to compete against alternative fuels and because of its
competitively priced supply of gas.  In addition, the company has a rate
which allows negotiation with potential bypass customers, and no customer
has bypassed since the rate became effective in 1987.  Nicor Gas also offers
commercial and industrial customers flexibility and alternatives in rates
and service, increasing its ability to compete in these markets.

Direct connection to six interstate pipelines and extensive underground
storage capacity allow the company to maintain rates that are among the
lowest in the nation, while also providing transportation customers with
direct access to gas supplies and storage services.  In addition, in an
effort to ensure supply reliability, the company purchases gas from several
different producing regions under varied contract terms.

Nicor Gas' growth in deliveries has typically come from a combination of
customer additions and increased usage among existing commercial and
industrial customers.  While the company anticipates continued modest growth
in deliveries attributable to these factors, it expects this growth to be
adversely affected by customers' installation of newer, more
energy-efficient equipment.  To help achieve growth in deliveries, Nicor Gas
will continue to pursue other opportunities in the electric generation
market.  Nicor Gas has also been pursuing several nontraditional activities. 
These activities include finding innovative ways to utilize its physical
assets by providing natural gas storage and intrastate transportation
services.

Nicor Gas is regulated by the ICC, which establishes the rules and
regulations governing utility rates and services in Illinois.  Rates are
designed to allow the company to recover its costs and provide an
opportunity to earn a fair return for its investors.  Changes in the
regulatory environment could affect the longer-term performance of Nicor
Gas.

The energy industry has undergone fundamental changes over the past several
years.  Since the 1980s industrial and large commercial customers have had
the opportunity to purchase natural gas from suppliers other than their
local gas distribution company.  To make choice an option for even more
customers, Nicor Gas launched its Customer Select test program in 1998, and
20,000 commercial and industrial customers, the maximum allowed to enroll, 





Nicor Inc.                                                           Page 15

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

chose to participate.  In September 1998, the company received approval to
open the program to an additional 40,000 business customers and 80,000
residential customers beginning in 1999.  In all instances, Nicor Gas will
continue to deliver natural gas to the customer, provide for the safety and
maintenance of its distribution system and read customer meters. 
<TABLE>
Gas Distribution Statistics
<CAPTION>
                                                  1998            1997             1996   
   
Operating revenues (millions):
  Sales
    <S>                                        <C> <C>         <C>              <C>
    Residential                                $   813.6       $ 1,126.0        $ 1,040.2
    Commercial                                     189.4           314.8            281.9
    Industrial                                      27.5            56.8             54.4
                                                 1,030.5         1,497.6          1,376.5
  Transportation
    Commercial                                      58.6            55.3             55.7
    Industrial                                      39.4            48.4             54.0
                                                    98.0           103.7            109.7
  Revenue taxes and other                          100.5           129.2            124.0
                                               $ 1,229.0       $ 1,730.5        $ 1,610.2

Deliveries (Bcf):
  Sales
    Residential                                    192.4           233.2            247.0
    Commercial                                      44.3            65.2             67.0
    Industrial                                       7.1            12.9             15.0
                                                   243.8           311.3            329.0
  Transportation
    Commercial                                      67.5            66.0             73.5
    Industrial                                     175.7           168.0            154.1
                                                   243.2           234.0            227.6
                                                   487.0           545.3            556.6

Year-end customers (thousands):
  Sales
    Residential                                  1,737.6         1,710.0          1,688.5
    Commercial                                     127.9           143.0            142.1
    Industrial                                       9.1            11.1             11.6
                                                 1,874.6         1,864.1          1,842.2
  Transportation
    Commercial                                      35.9            18.7             18.1
    Industrial                                       5.0             3.0              2.7
                                                    40.9            21.7             20.8
                                                 1,915.5         1,885.8          1,863.0

Other statistics: 
  Degree days (normal 6,116)                       4,834           6,254            6,429
  Colder (warmer) than normal                    (21.0)%            2.3%             5.1%
  Average gas cost per Mcf sold                $    2.76       $    3.54        $    2.99
</TABLE>




Nicor Inc.                                                           Page 16

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Shipping.  Tropical Shipping is one of the largest containerized cargo
carriers in the Caribbean, a region which is characterized by modest market
growth and intensifying competition.  The company has a reputation for
providing quality and on-time service and has earned leading market shares
in many of the ports it serves.  Markets served include the Bahamas, Cayman
Islands, Dominican Republic, Virgin Islands and Eastern Caribbean.

Tropical Shipping's financial results can be significantly affected by
general economic conditions in the United States and the Caribbean.  The
company's shipments consist primarily of southbound cargo such as building
materials, food and other necessities for developers, manufacturers and
residents in the Caribbean, as well as tourist-related shipments intended
for use by hotels, resorts and cruise ships.  The balance of Tropical
Shipping's cargo consists of northbound shipments of agricultural products
and apparel and interisland shipments.

The Caribbean marketplace is becoming increasingly competitive.  The Ocean
Shipping Reform Act, scheduled to go into effect on May 1, 1999, will allow
confidential contracts between shipping companies and their customers.  It
is anticipated that this change will lead to further price competition.
Additionally, global carriers are establishing a presence in the Caribbean
market.  Tropical Shipping plans to meet these challenges through
competitive pricing, additional service offerings, expansion into additional
ports and a more efficient deployment of its vessel fleet.
<TABLE>
Shipping Statistics
<CAPTION>
                                                  1998            1997             1996  

TEUs shipped (thousands)
  <S>                                              <C>             <C>               <C>
  Southbound                                       119.4           110.0             97.4
  Northbound                                        16.1            14.5             14.3
  Interisland                                        8.7            14.0              7.5
                                                   144.2           138.5            119.2

Ports served                                          23              26               26
Vessels owned                                         13              14               14
Revenue per TEU                                $   1,526       $   1,488        $   1,558
</TABLE>
Other Nicor Ventures.  As the natural gas and electric utility industries
are further deregulated, Nicor is continually looking for opportunities to
provide products and services that will meet customers' energy needs--and
for innovative ways to generate new revenue or contribute to earnings per
share growth.  Over the past few years, the company:  

-    entered the gas marketing business and formed a joint venture with   
     Dynegy to sell natural gas, electricity and other products and services
     in Illinois and throughout the Midwest;
-    partnered with Dynegy to develop large electric power generation 
     projects in the Midwest;
-    entered the wholesale gas trading business; and
-    launched a number of small, but strategic, businesses that build on 
     Nicor's strengths and expertise in the utility industry.




Nicor Inc.                                                           Page 17

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

New Accounting Pronouncements.  In December 1998, the Emerging Issues Task
Force reached a consensus on Issue No. 98-10, Accounting for Contracts
Involved in Energy Trading and Risk Management Activities.  In June 1998,
the Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities.  In March
1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.  These pronouncements are not
expected to have a material impact on the company's financial condition or
results of operations.  For further information, see New Accounting
Pronouncements on page 29.

Market Risk.  The company is exposed to market risk in the normal course of
its business operations, including the risk of loss arising from adverse
changes in natural gas commodity prices and interest rates.

Commodity Price Risk.  The company has established policies and procedures
governing the management of commodity market risks and the use of derivative
commodity instruments to hedge its exposure to such risks.  A risk
management committee exists to oversee compliance with such policies and
procedures.

Nicor's regulated utility, Nicor Gas, is generally not exposed to market
risk caused by changes in commodity prices.  This is due to current Illinois
rate regulation, which allows for all prudently incurred costs of natural
gas to be recovered from customers. 

Nicor's unregulated energy businesses are subject to natural gas commodity
price risk, arising primarily from fixed price purchase and sale agreements
and gas in storage inventories. Derivative commodity instruments such as
futures, options and swaps may be used to hedge this risk.  The company also
participates in nontrading activities.  Open positions in the trading sector
are restricted by policy to an immaterial amount.  To manage the credit risk
inherent in the company's commodity price risk management programs, the
company contracts with creditworthy counterparties and limits its exposure
to any one counterparty. 

Commodity price sensitivity analysis is used to measure the company's
exposure to changes in the price of natural gas.  The company's net
commodity position consists of inventories, purchase and sale agreements,
and exchange traded and over-the-counter contracts.  The fair value of the
company's net position at December 31, 1998, was $18 million, based upon
quoted futures and basis prices.  A 10 percent adverse change in such prices
would negatively impact net income by about $1 million.  Actual values and
results will differ as market conditions vary.

Interest Rate Risk.  The company is also exposed to changes in interest
rates primarily as a result of its short- and long-term debt.  The company
manages its interest rate risk primarily by issuing long-term fixed-rate
debt with varying maturities and refinancing certain debt.  For further
information about debt securities, interest rates and fair values, see the
Consolidated Statement of Capitalization on page 26 and Short- and Long-Term
Debt and Fair Value of Financial Instruments on page 33.  




Nicor Inc.                                                           Page 18

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Year 2000 Readiness.  The Year 2000 issue arose because many existing
computer programs use only the last two digits to refer to a year.  If
date-sensitive devices incorrectly read the year 2000 and assume it to be
1900, many computer systems and software applications, as well as embedded
chips, could fail or produce erroneous results.

This disclosure contains forward-looking statements.  In connection with the
Safe Harbor provisions of the Private Securities Litigation Reform Act of
1995, the company cautions that, while it believes such statements to be
reasonable and makes them in good faith, actual results may vary.  Nicor's
ability to meet its objectives identified below is dependent upon several
factors, including the timely provision of necessary upgrades and
modifications by suppliers and contractors.  In addition, Nicor cannot
guarantee that third parties on whom it depends for essential services will
convert their critical systems and processes in a timely manner.  Each of
the components of the company's Year 2000 project is progressing and the
company believes it is taking all reasonable and appropriate steps necessary
to be able to operate successfully in the year 2000 and beyond. The
following summarizes the company's preparedness for the Year 2000.

Nicor Gas.  Nicor Gas has established a company-wide initiative to identify,
evaluate and address Year 2000 issues.  A team has been assembled that
includes an officer-level steering committee, full-time staff members and
representatives from key areas of the company.  In addition to this team of
employees, the company utilizes consultants to assist in the Year 2000
project and belongs to an industry alliance which facilitates the sharing of
information among companies.  Work is progressing in the following phases:
inventory, assessment, remediation, testing and contingency planning.  The
company's Year 2000 effort, which began in early 1996, encompasses mainframe
systems, client-server and desktop systems, telecommunications, embedded
systems and third parties.

Mainframe Systems.  Nicor Gas' mainframe hardware and most core business
applications, which include customer service, billing and payroll, fall into
this category.  System inventory, assessment and remediation are complete. 
Testing is nearly complete, with all but one system tested and in
production.  The internal payroll system is scheduled to be tested and in
production by the second quarter of 1999.  A number of systems have been
replaced by Year 2000 compliant systems on client-server platforms. 
Hardware failure contingency plans have been established and plans to
address possible extended failures of critical software will be developed by
mid-1999. 

Client-server and Desktop Systems.  Nicor Gas has completed an inventory and
assessment of its client-server and desktop systems.  Many of the systems
are new and were designed to be compliant.  Remediation and testing are
scheduled to be completed by mid-1999.  Most functional areas have already
developed contingency plans to perform their responsibilities in the event
of failure.  Contingency plans to address possible longer-term disruptions
are scheduled to be completed by the third quarter of 1999.




Nicor Inc.                                                           Page 19

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (continued)

Telecommunications.  Inventory and assessment of telecommunication issues,
which involve data and voice communications, have also been completed. 
Remediation in some areas has been done through upgrading hardware and
software.  Further remediation and testing are scheduled to be completed by
mid-1999.  Contingency plans exist for many short duration outages, and by
the third quarter of 1999, the company expects to have addressed any
potentially more severe problems which may occur.

Embedded Systems.  The company has performed a system level inventory of
embedded systems, which include items such as process controls in the
storage and transmission operations, building security, air conditioning,
heating and elevator systems.  A more detailed inventory and assessment at
the component level in critical areas has been substantially completed, and
is expected to be finalized by the first quarter of 1999.  Experience has
indicated that approximately 90 percent of the components identified are
Year 2000 compliant. Remediation has begun and is expected to be completed
by mid-1999.  Testing plans for critical processes are being formulated and
testing is expected to be completed by mid-1999.  In critical gas supply and
storage areas, disaster recovery plans exist and are being updated for
various potential Year 2000 scenarios.

Third Parties.  Nicor Gas has contacted entities with which it has a
material relationship, such as natural gas suppliers, pipelines, electric
utilities, telecommunication service providers, banks and other suppliers of
goods and services, to determine their state of readiness.  Based on their
responses and the results of ongoing communications, Nicor Gas will consider
new business relationships with alternative providers of products and
services as necessary and to the extent alternatives are available. 
Assessment is scheduled to be completed in early 1999, necessary actions
taken by mid-1999, and contingency planning completed by the third quarter
of 1999.

Costs. Nicor Gas has incurred operating expenses of approximately $3 million
through December 31, 1998, and estimates an additional $3 million to $4
million will be incurred in connection with its Year 2000 efforts.  These
amounts represent costs incurred relating to hardware and software
modifications and replacements, internal information technology resources
devoted solely to the effort, and outside consultants.  The company has also
incurred less than $1 million in capital improvement costs to date that
would have been required in the normal course of business, but were incurred
sooner than originally planned.  The company estimates that as much as an
additional $2 million in capital improvement costs may be incurred to
support this project.  The timing of expenditures is not indicative of
readiness efforts or progress to date.

Risks.  The company relies on the producers of natural gas and suppliers of
interstate transportation capacity to deliver natural gas to the company's
distribution system.  External infrastructure, such as electric, telephone
and water service, is necessary for the company's basic operations as well
as the operations of many of its customers.




Nicor Inc.                                                           Page 20

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations (concluded)

With respect to Nicor Gas' operations, those over which it has direct
control, the company believes the most significant potential risks involve:
its ability to use electronic devices to control and operate its
distribution system, its ability to respond appropriately to customers'
calls for information and assistance, and its ability to maintain its
internal network of computer systems.  The company's Year 2000 project is
designed to concentrate its efforts on these critical areas.

Should any third party with which the company has a material relationship
fail, or should Nicor Gas' actions prove to be less than completely
effective, the impact could become a significant challenge to the company's
ability to operate its distribution system and communicate with its
customers.  It could also have a material adverse financial impact,
including but not limited to: lost operating revenues, increased operating
costs and claims from customers related to business interruption.  Because
of the uncertainties related to this matter, the company continues to
develop contingency plans.

Contingency Planning.  The company's Year 2000 contingency planning
encompasses business continuity both within the company and in the external
business environment.  As part of normal business practice, the company
maintains plans to follow during emergencies.  For example, many of the
components involved in the gas distribution system can be manually
overridden, and customer calls can be handled at alternate sites.  The
company continues to develop contingency plans that will address a variety
of scenarios that could emerge and expects that effort to continue through
1999.

Other Nicor Affiliates.  Affiliates other than Nicor Gas are also managed as
part of the Year 2000 project with similar action plans.  Most of the Year
2000 issues in these businesses are similar to those of Nicor Gas.  These
affiliates, being relatively small ventures, appear to be impacted in only
minor ways, with the exception of Tropical Shipping.  Tropical Shipping has
remediated its main cargo-tracking program and has particular concerns with
Caribbean interisland communications.  Tropical's overall schedule calls for
remediation activities to be completed by mid-1999, and testing and
contingency plans to be completed by the third quarter of 1999.  Costs for
remediation are not expected to be significant.

Other Contingencies.  The company is involved in legal or administrative
proceedings before various courts and agencies with respect to rates, taxes
and other matters.  In addition, the company is conducting environmental
investigations and remedial activities at former manufactured gas plant
sites.  Although unable to determine the outcome of these contingencies,
management believes that appropriate accruals have been recorded.  Final
disposition of these matters is not expected to have a material impact on
the company's financial condition or results of operations.  For further
information, see Contingencies on page 37.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see Market
Risk on page 17, which is incorporated herein by reference.




Nicor Inc.                                                             Page 21

Item 8.  Financial Statements and Supplementary Data

                                                                         Page

Report of Independent Public Accountants                                  22

Financial Statements:

  Consolidated Statement of Income                                        23

  Consolidated Statement of Cash Flows                                    24

  Consolidated Balance Sheet                                              25

  Consolidated Statement of Capitalization                                26

  Consolidated Statement of Common Equity                                 27

  Notes to the Consolidated Financial Statements                          28




Nicor Inc.                                                             Page 22

Report of Independent Public Accountants



To the Shareholders and Board of Directors of Nicor Inc.:


We have audited the accompanying consolidated balance sheet and statement of
capitalization of Nicor Inc. (an Illinois corporation) and subsidiary
companies as of December 31, 1998 and 1997, and the related consolidated
statements of income, common equity and cash flows for each of the three years
in the period ended December 31, 1998.  These financial statements and the
schedule referred to below are the responsibility of the company's management. 
Our responsibility is to express an opinion on these financial statements and
the schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nicor Inc. and subsidiary
companies as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The financial statement schedule on
page 40 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements. 
This schedule has been subjected to the auditing procedures applied in the
audits on the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                                                               
                                                                               
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 26, 1999



<TABLE>
Nicor Inc.                                                                                                               Page 23

Consolidated Statement of Income
(millions, except per share data)
<CAPTION>
                                                                                       Year ended December 31         
                                                                              1998               1997              1996    
<S>                                                                        <C>                <C>               <C>
Operating revenues                                                         $ 1,465.1          $ 1,992.6         $ 1,850.7  

Operating expenses
  Cost of gas                                                                  682.7            1,164.2           1,044.7  
  Operating and maintenance                                                    338.0              340.3             326.7  
  Depreciation                                                                 136.5              131.2             125.3  
  Taxes, other than income taxes                                                99.3              127.1             120.9
                                                                             1,256.5            1,762.8           1,617.6
Operating income                                                               208.6              229.8             233.1

Other income (expense), net                                                     15.5               16.2               3.6

Income before interest on debt and income taxes                                224.1              246.0             236.7  

Interest on debt, net of amounts capitalized                                    46.6               49.1              47.8  

Income before income taxes                                                     177.5              196.9             188.9   

Income taxes                                                                    61.1               69.0              67.7  

Income from continuing operations                                              116.4              127.9             121.2

Income from discontinued operations, net of income taxes                           -                  -              15.0

Net income                                                                     116.4              127.9             136.2

Dividends on preferred stock                                                      .3                 .4                .4

Earnings applicable to common stock                                        $   116.1          $   127.5         $   135.8  

Basic earnings per average share of common stock
  Continuing operations                                                    $    2.43          $    2.62         $    2.42
  Discontinued operations                                                          -                  -               .30
                                                                           $    2.43          $    2.62         $    2.72          
  Average shares of common stock outstanding                                    47.9               48.8              50.0   

Diluted earnings per average share of common stock
  Continuing operations                                                    $    2.42          $    2.61         $    2.41  
  Discontinued operations                                                          -                  -               .30  
                                                                           $    2.42          $    2.61         $    2.71  
  Average dilutive shares of common stock                                       48.1               48.9              50.1  
<F1>
The accompanying notes are an integral part of this statement.
</TABLE>


<TABLE>
Nicor Inc.                                                                                                                Page 24

Consolidated Statement of Cash Flows
(millions)
<CAPTION>
                                                                                      Year ended December 31         
                                                                            1998                1997             1996   

Operating activities
  <S>                                                                      <C> <C>            <C> <C>           <C> <C>
  Net income                                                               $   116.4          $   127.9         $   136.2
  Adjustments to reconcile net income to net cash 
    flow provided from operating activities:
      Depreciation                                                             136.5              131.2             125.3 
      Deferred income tax expense (benefit)                                     18.6              (14.3)             (1.4) 
      Change in assets and liabilities:
        Receivables, less allowances                                            90.6              (14.6)            (78.3)    
        Gas in storage                                                          22.3                3.8             (55.2)  
        Deferred/accrued gas costs                                               4.8               76.2             (42.4) 
        Accounts payable                                                        28.4              (92.0)             25.5  
        Prepaid pension benefit cost                                           (20.9)             (12.8)            (11.3)
        Other                                                                  (28.3)               5.7               6.2
  
  Net cash flow provided from operating activities                             368.4              211.1             104.6

Investing activities
  Capital expenditures                                                        (136.2)            (113.0)           (119.9)
  Short-term investments                                                       (35.6)              (7.5)              6.9  
  Other                                                                        (19.9)              (5.7)               .5

  Net cash flow used for investing activities                                 (191.7)            (126.2)           (112.5)
   
Financing activities
  Net proceeds from issuing long-term debt                                     107.3              106.3              74.2  
  Disbursements to retire long-term debt                                      (129.9)             (77.6)            (50.0) 
  Short-term borrowings (repayments), net                                      (44.4)             (13.1)             93.2 
  Dividends paid                                                               (70.3)             (67.8)            (66.0) 
  Disbursements to reacquire stock                                             (33.4)             (49.4)            (35.7)
  Other                                                                          1.8                1.4               5.9
  
  Net cash flow provided from (used for) financing activities                 (168.9)            (100.2)             21.6

Net increase (decrease) in cash and cash equivalents                             7.8              (15.3)             13.7  

Cash and cash equivalents, beginning of year                                     5.2               20.5               6.8

Cash and cash equivalents, end of year                                     $    13.0          $     5.2         $    20.5

Supplemental information
  Income taxes paid, net of refunds                                        $    42.9          $    66.6         $    75.3
  Interest paid, net of amounts capitalized                                     49.1               50.5              46.4 

<F1>
The accompanying notes are an integral part of this statement.
</TABLE>


<TABLE>
Nicor Inc.                                                                                                                 Page 25

Consolidated Balance Sheet
(millions)
<CAPTION>
                                                                                                    December 31         
                                                                                            1998                   1997  
                          Assets
Current assets
  <S>                                                                                    <C>  <C>               <C>   <C>
  Cash and cash equivalents                                                              $    13.0              $     5.2 
  Short-term investments, at cost which approximates market                                   55.8                   20.2   
  Receivables, less allowances of $6.3 and $8.6, respectively                                264.0                  354.6   
  Gas in storage, at last-in, first-out cost                                                 105.5                  127.8   
  Other                                                                                       26.4                   27.0 
  
                                                                                             464.7                  534.8 

Property, plant and equipment, at cost
  Gas distribution                                                                         3,119.7                3,026.8  
  Shipping                                                                                   258.9                  240.4 
  Other                                                                                        1.2                     .5  
                                                                                           3,379.8                3,267.7  
  Less accumulated depreciation                                                            1,648.0                1,531.9  

                                                                                           1,731.8                1,735.8 

Other assets                                                                                 168.1                  124.0 

                                                                                         $ 2,364.6              $ 2,394.6

               Liabilities and capitalization 

Current liabilities                                                                                
  Long-term obligations due within one year                                              $     1.2              $    25.4 
  Short-term borrowings                                                                      234.5                  278.9 
  Accounts payable                                                                           270.3                  241.9  
  Accrued gas costs                                                                           29.9                   25.1
  Other                                                                                       43.0                   50.3

                                                                                             578.9                  621.6 

Deferred credits and other liabilities
  Deferred income taxes                                                                      238.9                  214.9  
  Regulatory income tax liability                                                             78.6                   81.7  
  Unamortized investment tax credits                                                          44.1                   46.2  
  Other                                                                                      101.5                  129.6  

                                                                                             463.1                  472.4 

Capitalization
  Long-term debt                                                                             557.3                  550.2 
  Preferred stock                                                                              6.3                    6.4  
  Common equity                                                                              759.0                  744.0  

                                                                                           1,322.6                1,300.6  

                                                                                         $ 2,364.6              $ 2,394.6

<F1>
The accompanying notes are an integral part of this statement.
</TABLE>

<TABLE>
Nicor Inc.                                                                                                                Page 26

Consolidated Statement of Capitalization
(millions, except share data)
<CAPTION>
                                                                                  December 31                  
                                                                        1998                       1997        
First Mortgage Bonds
  Maturity                     Interest rate
    <S>                            <S>                            <C>    <S>                <C>  <C>
    1998                           5.875%                         $      -                  $    25.0
    1999                           6.25                                  -                       25.0
    2000                           5.875                              50.0                       50.0
    2001                           6.45                               75.0                       75.0
    2002                           6.75                               50.0                       50.0
    2003                           5.75                               50.0                          -
    2021                           8.875                              50.0                       50.0
    2022                           8.25                                  -                       75.0
    2023                           7.375                              50.0                       50.0
    2024                           8.25                               50.0                       50.0
    2025                           7.26                               50.0                       50.0
    2027                           7.375                              50.0                       50.0
    2028                           6.58                               50.0                          -
                                                                     525.0                      550.0
  Less: Amount due within one year                                       -                       25.0
        Unamortized debt discount, net of premium                      4.2                        4.1

                                                                     520.8     39.4%            520.9     40.1%

Other long-term debt
  Notes payable due 2000, 6.83%                                       22.5                       22.5
  Other                                                               15.2                        7.2
                                                                      37.7                       29.7
  Less: Amount due within one year                                     1.2                         .4

                                                                      36.5      2.7              29.3      2.2

Preferred and preference stock
  Cumulative, $50 par value, 1,600,000 preferred shares
     authorized; and cumulative, without par value,
     20,000,000 preference shares authorized
       Redeemable preferred stock, 4.48% and 5.00% series,
        125,223 and 125,623 shares outstanding, respectively           6.3       .5               6.4       .5

Common equity
  Common stock, $2.50 par value (160,000,000 and 80,000,000 
     shares authorized, 4,854,542 and 5,033,974 shares reserved
     for conversion and other purposes and 47,513,714 and
     48,216,656 shares outstanding, respectively)                    118.8                      120.5
  Retained earnings                                                  640.2                      623.5

                                                                     759.0     57.4             744.0     57.2 

                                                                 $ 1,322.6    100.0%        $ 1,300.6    100.0%

<F1>
The accompanying notes are an integral part of this statement.
</TABLE>


<TABLE>
Nicor Inc.                                                                                                      Page 27

Consolidated Statement of Common Equity
(millions, except per share data)
<CAPTION>
                                                                                       Year ended December 31           
                                                                         1998                    1997                1996   
Common stock
  <S>                                                                <C> <C>                 <C> <C>             <C> <C>
  Balance at beginning of year                                       $   120.5               $   123.7           $   125.8
  Issued and converted stock                                                .3                      .2                  .6 
  Reacquired and cancelled stock                                          (2.0)                   (3.4)               (2.7)

  Balance at end of year                                                 118.8                   120.5               123.7  

Paid-in capital
  Balance at beginning of year                                               -                    23.8                49.6
  Issued and converted stock                                               3.0                     2.9                 5.9 
  Reacquired and cancelled stock                                          (3.0)                  (26.7)              (31.7)

  Balance at end of year                                                     -                       -                23.8  

Retained earnings
  Balance at beginning of year                                           623.5                   582.1               512.2 
  Net income                                                             116.4                   127.9               136.2 
  Dividends on common stock ($1.48, $1.40 and
     $1.32 per share, respectively)                                      (70.6)                  (68.0)              (65.9)
  Dividends on preferred stock                                             (.3)                    (.4)                (.4)
  Reacquired and cancelled stock                                         (28.8)                  (18.1)                  -

  Balance at end of year                                                 640.2                   623.5               582.1

                                                                     $   759.0               $   744.0           $   729.6  

<F1>
The accompanying notes are an integral part of this statement.
</TABLE>


Nicor Inc.                                                           Page 28

Notes to the Consolidated Financial Statements

ACCOUNTING POLICIES

Consolidation.  The consolidated financial statements include the accounts
of Nicor and its subsidiaries.  All significant intercompany balances and
transactions have been eliminated.  The preparation of the consolidated
financial statements requires management to make estimates that affect the
reported amounts.  Actual results could differ from those estimates. 
Certain reclassifications were made to conform the prior years' financial
statements to the current year's presentation.

Regulation.  Nicor Gas is regulated by the ICC which establishes the rules
and regulations governing utility rates and services in Illinois.  The
company applies accounting standards that recognize the economic effects of
rate regulation and, accordingly, has recorded regulatory assets and
liabilities.  The company had net regulatory liabilities of about $100
million at December 31, 1998 and 1997.

Operating revenues and gas costs.  The cost of gas purchased, adjusted for
inventory activity, is reflected in volumetric charges to customers through
operation of the Uniform Purchased Gas Adjustment Clause (PGA).  Any
difference between PGA revenues and recoverable gas costs is deferred or
accrued with a corresponding decrease or increase to cost of gas.  This
difference is amortized as it is collected from or refunded to customers
through the PGA.

Depreciation.  Property, plant and equipment are depreciated over estimated
useful lives on a straight-line basis.  In April 1996, the gas distribution
composite depreciation rate was increased to 4.1 percent from 3.7 percent.  

Income taxes.  Deferred income taxes are provided for temporary differences
between the tax basis of an asset or liability and its reported amount in
the financial statements.  Although the federal investment tax credit has
been eliminated, Nicor Gas continues to amortize prior deferred amounts to
income over the lives of the applicable properties.

Cash and cash equivalents.  The company considers investments purchased with
a maturity of three months or less to be cash equivalents.

Receivable credit risk.  Nicor's major subsidiaries have diversified
customer bases and prudent credit policies which mitigate risk.




Nicor Inc.                                                           Page 29

Notes to the Consolidated Financial Statements (continued)

NEW ACCOUNTING PRONOUNCEMENTS

Derivative instruments and hedging activities.  In December 1998, the
Emerging Issues Task Force (EITF) reached a consensus on Issue No. 98-10,
Accounting for Contracts Involved in Energy Trading and Risk Management
Activities.  EITF Issue No. 98-10, which is effective for fiscal years
beginning after December 15, 1998, requires contracts entered into under
trading activities to be recorded at fair value on the balance sheet, with
the changes in fair value included in earnings.  The effects of application
of EITF Issue No. 98-10 are required to be reported as a cumulative effect
of a change in accounting principle.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities.  This
statement requires that an entity recognize all derivatives as either assets
or liabilities on the balance sheet and measure those instruments at fair
value.  Gains or losses resulting from changes in the values of those
derivatives are to be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting.  This statement requires
adoption no later than the first quarter of the company's 2000 fiscal year
and must be adopted as a cumulative effect of a change in accounting
principle.

Implementation of these pronouncements is not expected to have a material
impact on the company's financial condition or results of operations.

Internal use computer software.  In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use. 
This statement provides guidance on accounting for the costs of computer
software developed or obtained for internal use and is required to be
adopted no later than the company's 1999 fiscal year.  The company has
modified its method of capitalization of such costs by adopting this
statement prospectively on January 1, 1999.  Implementation of this
statement is not expected to have a material impact on the company's
financial condition or results of operations.

GAS IN STORAGE

Based on the average cost of gas purchased in December 1998 and 1997, the
estimated replacement cost of gas in inventory at December 31, 1998 and
1997, exceeded the last-in, first-out cost by $159.1 million and $194.6
million, respectively.




Nicor Inc.                                                           Page 30

Notes to the Consolidated Financial Statements (continued) 

INCOME TAXES
<TABLE>
The components of income tax expense are presented below:
<CAPTION>
(millions)                                        1998            1997             1996  
Current
  <S>                                          <C>  <C>        <C>  <C>         <C>  <C>
  Federal                                      $    36.4       $    71.3        $    61.7
  State                                              7.9            14.1              9.4
                                                    44.3            85.4             71.1
Deferred
  Federal                                           16.6            (8.4)            (1.4)
  State                                              2.0            (5.9)               -
                                                    18.6           (14.3)            (1.4)
Amortization of investment
  tax credits, net                                  (2.1)           (2.2)            (2.4)
Foreign taxes                                         .3              .1               .4
Income tax expense                             $    61.1       $    69.0        $    67.7
</TABLE>
The temporary differences which gave rise to the net deferred tax liability 
at December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
(millions)                                                        1998             1997  
Deferred tax liabilities
  <S>                                                          <C> <C>          <C> <C>
  Property, plant and equipment                                $   231.7        $   233.9
  Investment in foreign subsidiaries                                43.5             38.7
  Other                                                             25.0              6.7
                                                                   300.2            279.3
Deferred tax assets 
  Unamortized investment tax credits                                29.0             30.4
  Regulatory income tax liability                                   19.7             20.4
  Other                                                             24.4             27.9
                                                                    73.1             78.7
Net deferred tax liability                                     $   227.1        $   200.6
</TABLE>
The effective combined federal and state income tax rate was 34.4 percent,
35.1 percent and 35.9 percent in 1998, 1997 and 1996, respectively. 
Differences between federal income taxes computed using the statutory rate
and reported income tax expense are shown below:
<TABLE>
<CAPTION>
(millions)                                        1998            1997             1996  
Federal income taxes using
  <S>                                          <C>  <C>        <C>  <C>         <C>  <C>
  statutory rate                               $    62.1       $    68.9        $    66.1
State income taxes, net                              6.7             5.6              6.2
Other, net                                          (7.7)           (5.5)            (4.6)
Income tax expense                             $    61.1       $    69.0        $    67.7
</TABLE>



Nicor Inc.                                                           Page 31

Notes to the Consolidated Financial Statements (continued) 

DISCONTINUED OPERATIONS

In 1996, the company made a positive after-tax adjustment of $15 million to
its reserve for discontinued operations.  Factors contributing to the
adjustment included the settlement of certain contingencies at terms more
favorable than originally anticipated and revisions in management's estimate
of the remaining costs related to discontinued contract drilling, oil and
gas, inland barging and extractive operations.  The balance of the reserve
will continue to be evaluated as the remaining medical benefit obligation,
legal, tax and other contingencies are resolved.  Due to the long-term
nature of the medical benefit obligation, no adjustment to the reserve is
anticipated in the foreseeable future.

POSTRETIREMENT BENEFITS

Pension benefits.  Nicor Gas maintains noncontributory defined benefit
pension plans covering substantially all employees hired prior to January 1,
1998.  The following table sets forth the components of the changes in the
plans' benefit obligation and plan assets for the periods ended October 1,
reconciled to the prepaid pension benefit cost recorded in the financial
statements at December 31:
<TABLE>
<CAPTION>
(millions)                                                        1998             1997  
Change in benefit obligation
<S>                                                            <C> <C>          <C> <C>
Benefit obligation at beginning of period                      $   223.9        $   245.3
Service cost                                                         6.7              6.5
Interest cost                                                       16.0             17.6
Actuarial (gain) loss                                               18.5             (2.4)
Benefits paid                                                      (22.8)           (43.1)
Benefit obligation at end of period                                242.3            223.9

Change in plan assets 
Fair value of plan assets at beginning of period                   422.6            381.9
Actual return on plan assets                                         1.5             83.5
Employer contributions                                                .4               .3
Benefits paid                                                      (22.8)           (43.1)
Fair value of plan assets at end of period                         401.7            422.6

Funded status                                                      159.4            198.7
Unrecognized net actuarial gain                                    (61.7)          (118.5)
Unrecognized transition asset                                      (12.5)           (16.3)
Unrecognized prior service cost                                      3.3              3.7
Other                                                                3.2              3.2
Prepaid pension benefit cost at December 31                    $    91.7        $    70.8
</TABLE>



Nicor Inc.                                                           Page 32

Notes to the Consolidated Financial Statements (continued) 

Net periodic pension cost (benefit) included the following components:
<TABLE>
<CAPTION>
(millions)                                        1998            1997             1996  
<S>                                            <C>   <C>       <C>   <C>        <C>   <C>
Service cost                                   $     6.7       $     6.5        $     7.7
Interest cost                                       16.0            17.6             19.8
Expected return on plan assets                     (35.1)          (31.6)           (31.3)
Recognized net actuarial gain                       (4.7)           (1.6)             (.4)
Amortization of unrecognized 
  transition asset                                  (3.8)           (3.8)            (3.8)
Amortization of prior service cost                    .4              .4               .4
Net periodic pension cost (benefit)            $   (20.5)      $   (12.5)       $    (7.6)
</TABLE>
Assumptions used in the computations included the following:
<TABLE>
<CAPTION>
                                                                  1998             1997   
<S>                                                                <C>              <C>
Discount rate                                                      6.75%            7.50%
Expected return on plan assets                                     9.00             8.50
Rate of compensation increase                                      4.00             5.00
</TABLE>
Other postretirement benefits.  Health care and life insurance benefits are
provided for eligible retired employees of Nicor Gas.  Certain employees'
postretirement health care benefits have been capped to a defined annual per
capita medical cost.  The following table sets forth the components of the
changes in the plans' benefit obligation and plan assets for the period ended
October 1, reconciled to the accrued other postretirement benefit cost
recorded in the financial statements at December 31:
<TABLE>
<CAPTION>
(millions)                                                        1998             1997  
Change in benefit obligation
<S>                                                            <C> <C>          <C> <C>
Benefit obligation at beginning of period                      $   115.0        $   114.2
Service cost                                                         1.3              1.7
Interest cost                                                        8.3              8.3
Amendments                                                             -             (3.1)
Actuarial loss                                                        .9              2.0
Plan participants' contributions                                      .7               .7
Benefits paid                                                       (7.9)            (8.8)
Benefit obligation at end of period                                118.3            115.0

Change in plan assets
Fair value of plan assets at beginning of period                    16.6             13.4
Actual return on plan assets                                           -              3.2
Employer contributions                                               7.2              8.1
Plan participants' contributions                                      .7               .7
Benefits paid                                                       (7.9)            (8.8)
Fair value of plan assets at end of period                          16.6             16.6

Funded status                                                     (101.7)           (98.4)
Unrecognized transition obligation                                  43.2             46.3
Unrecognized net actuarial loss                                      6.4              4.1
Other                                                                 .8             (1.6)
Accrued other postretirement benefit
  cost at December 31                                          $   (51.3)       $   (49.6)
</TABLE>



Nicor Inc.                                                           Page 33

Notes to the Consolidated Financial Statements (continued) 

Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(millions)                                        1998            1997             1996  
<S>                                            <C>   <C>       <C>   <C>        <C>   <C>
Service cost                                   $     1.3       $     1.7        $     2.6
Interest cost                                        8.3             8.3              9.0
Expected return on plan assets                      (1.4)           (1.2)            (1.0)
Amortization of unrecognized
  transition obligation                              3.1             3.3              3.6
Net periodic postretirement 
  benefit cost                                 $    11.3       $    12.1        $    14.2
</TABLE>
For measurement purposes, the health care cost trend rate for pre-Medicare
benefits was assumed to be 7 percent for 1999, declining to 5 percent by
2001 and remaining at that level thereafter.  The health care cost trend
rate for post-Medicare benefits was assumed to be 5 percent.  A one-per-
centage-point change in the assumed health care cost trend rates would have
the following effects:
<TABLE>
<CAPTION>
                                                                    One percent      
(millions)                                                     Increase         Decrease 
Effect on total of service and 
  <S>                                                          <C>   <C>        <C>   <C>
  interest cost components                                     $     1.1        $     (.9)
Effect on benefit obligation                                        13.0            (10.9)
</TABLE>
Other assumptions are consistent with those used in the valuation of pension
benefits.

SHORT- AND LONG-TERM DEBT

The company maintains short-term credit agreements with major domestic and
foreign banks.  These agreements, which serve as backup for the issuance of
commercial paper, totaled $280 million at December 31, 1998.  Commitment 
fees of up to .08 percent per annum were paid on these lines.  All credit
agreements have variable interest rate options tied to short-term markets.

The company had $234.5 million and $278.9 million of commercial paper
outstanding with a weighted average interest rate of 5.6 percent and
5.9 percent at December 31, 1998 and 1997, respectively.

Bank cash balances averaged about $3.5 million during 1998, which partially
compensated for the cost of maintaining accounts and other banking services. 
Such demand balances may be withdrawn at any time.

First mortgage bonds are secured by liens on substantially all gas
distribution property and franchises.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The recorded amount of short-term investments and short-term borrowings
approximates fair value because of the short maturity of the instruments. 
Based on quoted market interest rates, the recorded amount of long-term debt
outstanding, including current maturities, also approximates fair value.




Nicor Inc.                                                           Page 34

Notes to the Consolidated Financial Statements (continued) 

STOCK-BASED COMPENSATION

Nicor has a plan which permits the granting of stock options, restricted
stock and alternate stock rights to key executives and managerial employees,
as well as an employee stock purchase plan.  The company does not recognize
compensation expense for these plans.  If compensation expense for these
plans had been recognized based on the fair value of awards at the grant
dates, the impact on the company's net income and earnings per share would
not have been material.

The company may grant options for up to 3.5 million shares and has granted
options on 1.6 million shares through December 31, 1998.  The stock option
exercise price equals the stock's market price on the date of grant. 
Options are vested after one year, generally become exercisable after three
years and expire after ten years.

A summary of stock option activity is presented below:
<TABLE>
<CAPTION>
                                                                               Weighted
                                                                               average
                                                               Number          exercise
                                                              of shares         price   

Options outstanding at:
<S>                                                             <C>            <C> <C>
December 31, 1995                                               756,000        $   24.74
  Granted                                                       143,000            28.25
  Exercised                                                    (261,000)           22.51
  Cancelled                                                     (10,000)           28.18
December 31, 1996                                               628,000            26.41
  Granted                                                       134,000            32.25
  Exercised                                                     (64,000)           24.77
  Cancelled                                                     (25,000)           28.29
December 31, 1997                                               673,000            27.70
  Granted                                                       114,000            40.56
  Exercised                                                    (158,000)           26.05
  Cancelled                                                      (5,000)           40.63
December 31, 1998                                               624,000            30.37

Options exercisable at:
  December 31, 1996                                             142,000        $   26.50
  December 31, 1997                                             212,000            27.71
  December 31, 1998                                             265,000            26.25
</TABLE>
Stock options outstanding at December 31, 1998, had exercise prices ranging
from $19.63 to $40.69 and a weighted average remaining contractual life of
eight years.
<PAGE>
Nicor Inc.                                                           Page 35

Notes to the Consolidated Financial Statements (continued) 

The weighted average fair value of options granted in 1998 and 1997 is $4.52
and $4.07, respectively. The fair value of each option was estimated on the
date of grant using the Black-Scholes option-pricing model with the
following assumptions used for grants in 1998 and 1997, respectively: 
dividend yield of 3.9 percent and 4.6 percent; volatility of 14.5 percent
and 16.9 percent; risk-free interest rate of 5.6 percent and 6.6 percent;
and expected periods outstanding of three years for both years. 

There were no shares of restricted stock or alternate stock rights
outstanding at December 31, 1998.

Under the employee stock purchase plan, the company may sell up to 1.5
million shares of common stock to its employees and has sold about 830,000
shares through December 31, 1998.  Under the terms of this plan, eligible
employees may purchase shares at 90 percent of the stock's market price. 
The company sold about 20,000 shares to employees in both 1998 and 1997. 
The weighted average market value of shares sold in 1998 and 1997 was 
$42.88 and $34.98, respectively.

COMMON STOCK

Shareholder rights plan.  In 1997, the company's Board of Directors adopted
a shareholder rights plan.  Under the plan, shareholders of record on
September 30, 1997, were assigned one right for each share of Nicor common
stock held.  The rights will be exercisable only if a person acquires, or
announces a tender offer that would result in, ownership of 10 percent or
more of Nicor's common stock.  If a person acquires beneficial ownership of
10 percent or more of Nicor's common stock, all holders of rights other than
the acquiring person will be entitled to purchase Nicor common stock at a
50 percent discount from the market price.  Nicor may redeem the rights at
$.01 per right at any time before someone becomes a 10 percent beneficial
owner.  The rights expire on September 30, 2007.

Changes in common shares.  Changes in common shares outstanding are
summarized below:

(millions)                                 1998          1997          1996   
Beginning of year                          48.2          49.5          50.3
Issued and converted                         .1            .1            .3
Reacquired and cancelled                    (.8)         (1.4)         (1.1)
End of year                                47.5          48.2          49.5 
 
Through common stock repurchase programs, Nicor has purchased and retired
 .7 million, 1.3 million and .8 million shares in 1998, 1997 and 1996,
respectively.

BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

Nicor is a holding company that through its wholly owned subsidiaries, Nicor
Gas and Tropical Shipping, operates in two separately managed reportable
segments: gas distribution and shipping.  The gas distribution segment,
Nicor's principal business, serves 1.9 million customers in a service
territory that encompasses most of the northern third of Illinois, excluding




Nicor Inc.                                                           Page 36

Notes to the Consolidated Financial Statements (continued) 

the city of Chicago.  The shipping segment transports containerized freight
between Florida and the Caribbean region.  Other Nicor ventures include:
acting as a general contractor for cogeneration and other energy development
projects; providing consulting, product testing and commercialization for 
the natural gas industry; and offering appliance service contracts.

Nicor evaluates segment performance based on operating income.  Intercompany
billing among segments is based on direct and indirect costs incurred. 
Financial data for business segments is presented below:
<TABLE>
<CAPTION>
(millions)                                        1998            1997             1996  
Operating revenues
  <S>                                          <C>             <C>              <C>
  Gas distribution                             $ 1,229.0       $ 1,730.5        $ 1,610.2
  Shipping                                         224.5           213.1            195.0
  Other Nicor ventures                              11.6            58.7             52.7
  Corporate and eliminations                           -            (9.7)            (7.2)
                                               $ 1,465.1       $ 1,992.6        $ 1,850.7
Operating income (loss)
  Gas distribution                             $   185.5       $   210.1        $   215.6
  Shipping                                          27.6            25.3             22.2
  Other Nicor ventures                              (1.9)           (1.0)            (1.9)
  Corporate and eliminations                        (2.6)           (4.6)            (2.8)
                                               $   208.6       $   229.8        $   233.1
Interest on debt, net
  Gas distribution                             $    43.4       $    45.9        $    44.4
  Shipping                                           1.3             1.9              1.9
  Other Nicor ventures                                .2              .2               .1
  Corporate and eliminations                         1.7             1.1              1.4
                                               $    46.6       $    49.1        $    47.8
Income taxes
  Gas distribution                             $    55.3       $    64.7        $    63.6
  Shipping                                          10.2             9.1              7.8
  Other Nicor ventures                               (.9)            (.5)             (.8)
  Corporate and eliminations                        (3.5)           (4.3)            (2.9)
                                               $    61.1       $    69.0        $    67.7
Property, plant and equipment, net
  Gas distribution                             $ 1,617.8       $ 1,629.9        $ 1,661.9
  Shipping                                         113.3           105.6            108.9
  Other Nicor ventures                                .7              .3              1.1
                                               $ 1,731.8       $ 1,735.8        $ 1,771.9
Capital expenditures
  Gas distribution                             $   112.6       $   101.8        $   107.7
  Shipping                                          23.3            10.9             11.2
  Other Nicor ventures                                .3              .3              1.0
                                               $   136.2       $   113.0        $   119.9
Depreciation
  Gas distribution                             $   120.8       $   116.6        $   111.8
  Shipping                                          15.4            14.2             13.4
  Other Nicor ventures                                .3              .4               .1
                                               $   136.5       $   131.2        $   125.3
</TABLE>



Nicor Inc.                                                           Page 37

Notes to the Consolidated Financial Statements (continued) 

See Gas Distribution Statistics on page 15 for disclosure of sales and
transportation revenues in the gas distribution segment.

Tropical Shipping's vessels are under foreign registry and its containers
are considered instruments of international trade.  Although the majority of
its long-lived assets are foreign owned and its revenues are derived from
foreign operations, the functional currency is generally the U.S. dollar.      

CONTINGENCIES

The company is involved in legal or administrative proceedings before
various courts and agencies with respect to rates, taxes and other matters.

Current environmental laws may require cleanup of certain former
manufactured gas plant sites.  To date, Nicor Gas has identified about 40
properties for which it may, in part, be responsible.  The majority of these
properties are not presently owned by the company.  Information regarding
preliminary site reviews has been presented to the Illinois Environmental
Protection Agency.  More detailed investigations and remedial activities are
either in progress or planned at many of these sites.  The results of
continued testing and analysis should determine to what extent additional
remediation is necessary and may provide a basis for estimating any
additional future costs which, based on industry experience, could be
significant.  In accordance with ICC authorization, the company has been
recovering these costs from its customers.

On December 20, 1995, Nicor Gas filed suit in the Circuit Court of Cook
County against certain insurance carriers seeking recovery of environmental
cleanup costs of certain former manufactured gas plant sites.  Presently,
management cannot predict the outcome of this lawsuit.  Any recoveries from
such litigation or other sources will be flowed back to the company's
customers.

Although unable to determine the outcome of these contingencies, management
believes that appropriate accruals have been recorded.  Final disposition of
these matters is not expected to have a material impact on the company's
financial condition or results of operations.




Nicor Inc.                                                           Page 38

Notes to the Consolidated Financial Statements (concluded) 

QUARTERLY RESULTS (UNAUDITED)

Quarterly results fluctuate due mainly to the seasonal nature of the gas
distribution business.
<TABLE>
<CAPTION>
(millions,                                               Quarter ended             
  except per share data)                  Mar. 31     June 30     Sept. 30     Dec. 31

1998
  <S>                                    <C>         <C>          <C>         <C>
  Operating revenues                     $  562.3    $  271.3     $  203.2    $  428.2
  Operating income                           64.9        48.9         38.9        55.8
  Net income                                 36.2        28.5         20.6        31.1
  Earnings per common share:
    Basic                                     .75         .59          .43         .65
    Diluted                                   .75         .59          .43         .65

1997
  Operating revenues                     $  900.0    $  303.7     $  209.2    $  579.7
  Operating income                           73.2        52.6         38.6        65.3
  Net income                                 40.4        28.7         19.5        39.2
  Earnings per common share:
    Basic                                     .82         .59          .40         .81
    Diluted                                   .82         .58          .40         .81
</TABLE>




Nicor Inc.                                                           Page 39

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

None.


PART III

Items 10. and 11.  Directors and Executive Officers of the Registrant and
                   Executive Compensation

Information on directors and executive compensation is contained on pages 2
through 6 and 13 through 17 of the Definitive Proxy Statement, dated
March 5, 1999, and is incorporated herein by reference.  Information
relating to the executive officers of the registrant is provided on pages 6
and 7 in Part I of this document.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Information about shares beneficially owned by directors and executive
officers is contained on pages 7 and 8 of the Definitive Proxy Statement,
dated March 5, 1999, and is incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions

None.


PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K

(a)   1)    Financial Statements:

            See Item 8, Financial Statements and Supplementary Data, on
            page 21 filed herewith, for a list of financial statements.
  
      2)    Financial Statement Schedules:

            Schedule
             Number                                                       Page

                        Report of Independent Public Accountants           22
               II       Valuation and Qualifying Accounts                  40

            Schedules other than those listed are omitted because they are not
            applicable.

      3)    Exhibits Filed:

            See Exhibit Index beginning on page 42 filed herewith.

(b)         The company did not file a report on Form 8-K during the fourth
            quarter of 1998.

 


<TABLE>
Nicor Inc.                                                                                           Page 40

Schedule II

VALUATION AND QUALIFYING ACCOUNTS
(millions)
<CAPTION>


                                                                         Additions        
                                               Balance at        Charged to        Charged                           Balance at
                                                beginning         costs and        to other                            end of
           Description                          of period         expenses         accounts         Deductions         period  

1998

  Allowance
     for uncollectible
     <S>                                       <C>    <C>        <C>   <C>        <C>      <S>      <C>   <C>        <C>    <C>
     accounts receivable                       $      8.6        $     13.6       $        -        $     15.9(a)    $      6.3
  Reserve for estimated
     future costs related to
     discontinued businesses(b)                      11.7                 -                -                 5.4(c)         6.3

1997

  Allowance
     for uncollectible
     accounts receivable                       $      7.7        $     16.0       $        -        $     15.1(a)    $      8.6
  Reserve for estimated
     future costs related to
     discontinued businesses(b)                      14.5                 -                -               2.8(c)          11.7


1996

  Allowance
     for uncollectible
     accounts receivable                       $      5.8        $     12.7       $        -        $     10.8(a)    $      7.7
  Reserve for estimated
     future costs related to
     discontinued businesses(b)                      18.2                 -              2.1(c)            5.8(d)          14.5
<F1>
(a)  Accounts receivable written off, net of recoveries.
<F2>
(b)  Excludes the related reserve for federal and state income taxes.
<F3>
(c)  Net receipts, expenditures, operating results, gains and losses related to discontinued businesses
     credited or charged to reserve.
<F4>
(d)  Adjustment credited to income.
</TABLE>



Nicor Inc.                                                           Page 41

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                    Nicor Inc.


Date    March 19, 1999              By       DAVID L. CYRANOSKI      
                                             David L. Cyranoski
                                           Senior Vice President,
                                           Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 19, 1999.

              Signature                                    Title                

           THOMAS L. FISHER                   Chairman, President, Chief
           Thomas L. Fisher                   Executive Officer and Director

          DAVID L. CYRANOSKI                  Senior Vice President, Secretary 
          David L. Cyranoski                  and Treasurer and Principal
                                              Financial Officer

          GEORGE M. BEHRENS                   Vice President and Controller and
          George M. Behrens                   Principal Accounting Officer

      ROBERT M. BEAVERS, JR.*                 Director

      BRUCE P. BICKNER*                       Director

      JOHN H. BIRDSALL, III*                  Director

      THOMAS A. DONAHOE*                      Director

      JOHN E. JONES*                          Director

      DENNIS J. KELLER*                       Director

      CHARLES S. LOCKE*                       Director

      SIDNEY R. PETERSEN*                     Director

      PATRICIA A. WIER*                       Director




                                         *By       MARIANNE T. LORENZ      
                                                   Marianne T. Lorenz
                                                   (Attorney-in-fact)





Nicor Inc.                                                           Page 42

Exhibit Index

Exhibit
 Number                           Description of Document                     

  3.01    *  Articles of Incorporation of the company.  (File No. 2-55451,
             Form S-14, Nicor Inc., Exhibit 1-03 and Exhibit B of Amendment
             No. 1 thereto.)

  3.02    *  Amendment to Articles of Incorporation of the company.  (Proxy
             Statement dated April 20, 1979, Nicor Inc., Item 3 thereto.)

  3.03    *  Amendment to Articles of Incorporation of the company.  (File
             No. 2-68777, Form S-16, Nicor Inc., Exhibit 2-01.)

  3.04    *  Amendment to Articles of Incorporation of the company.  (File
             No. 1-7297, Form 10-K for 1985, Nicor Inc., Exhibit 3-03.)

  3.05    *  Amendment to Articles of Incorporation of the company.  (Proxy
             Statement dated March 12, 1987, Nicor Inc., Exhibit A and
             Exhibit B thereto.)

  3.06    *  Amendment to Articles of Incorporation of the company.  (File
             No. 1-7297, Form 10-K for 1992, Nicor Inc., Exhibit 3-06.)

  3.07    *  Amendments to Articles of Incorporation of the company.  (Proxy
             Statement dated March 9, 1994, Nicor Inc., Exhibit A-1 and
             Exhibit B thereto.)

  3.08    *  Amendment to Articles of Incorporation of the company.  (Proxy    
             Statement dated March 6, 1998, Nicor Inc., Item 2 thereto.) 
  
  3.09    *  By-Laws of the company as amended by the company's Board of
             Directors on May 3, 1995.  (File No. 1-7297, Form 10-Q for
             March 1995, Nicor Inc., Exhibit 3(ii).01.)

  4.01    *  Indenture of Commonwealth Edison Company to Continental Illinois
             National Bank and Trust Company of Chicago, Trustee, dated as of
             January 1, 1954.  (File No. 1-7296, Form 10-K for 1995, Nicor
             Gas, Exhibit 4.01.)

  4.02    *  Indenture of Adoption of Nicor Gas to Continental Illinois
             National Bank and Trust Company of Chicago, Trustee, dated
             February 9, 1954.  (File No. 1-7296, Form 10-K for 1995, Nicor
             Gas, Exhibit 4.02.)

  4.03    *  Supplemental Indenture, dated June 1, 1963, of Nicor Gas to
             Continental Illinois National Bank and Trust Company of Chicago,
             Trustee, under Indenture dated as of January 1, 1954.  (File No.
             2-21490, Form S-9, Nicor Gas, Exhibit 2-8.)

  4.04    *  Supplemental Indenture, dated May 1, 1966, of Nicor Gas to
             Continental Illinois National Bank and Trust Company of Chicago,
             Trustee, under Indenture dated as of January 1, 1954.  (File
             No. 2-25292, Form S-9, Nicor Gas, Exhibit 2-4.)




Nicor Inc.                                                           Page 43

Exhibit Index (continued)

Exhibit
 Number                           Description of Document                     

  4.05    *  Supplemental Indenture, dated June 1, 1971, of Nicor Gas to
             Continental Illinois National Bank and Trust Company of Chicago,
             Trustee, under Indenture dated as of January 1, 1954.  (File
             No. 2-44647, Form S-7, Nicor Gas, Exhibit 2-03.)

  4.06    *  Supplemental Indenture, dated April 30, 1976, between the company
             and Continental Illinois National Bank and Trust Company of
             Chicago, Trustee, under Indenture dated as of January 1, 1954. 
             (File No. 2-56578, Form S-9, Nicor Gas, Exhibit 2-25.)

  4.07    *  Supplemental Indenture, dated April 30, 1976, of Nicor Gas to
             Continental Illinois National Bank and Trust Company of Chicago,
             Trustee, under Indenture dated as of January 1, 1954.  (File
             No. 2-56578, Form S-9, Nicor Gas, Exhibit 2-21.)

  4.08    *  Supplemental Indenture, dated August 15, 1991, of Nicor Gas to
             Continental Bank, National Association, Trustee, under Indenture
             dated as of January 1, 1954.  (File No. 1-7296, Form 8-K for August
             1991, Nicor Gas, Exhibit 4-01.)

  4.09    *  Supplemental Indenture, dated May 1, 1993, of Nicor Gas to
             Continental Bank, National Association, Trustee, under Indenture
             dated as of January 1, 1954.  (File No. 1-7296, Form 10-Q for
             March 1993, Nicor Gas, Exhibit 4-02.)

  4.10    *  Supplemental Indenture, dated July 1, 1993, of Nicor Gas to
             Continental Bank, National Association, Trustee, under Indenture
             dated as of January 1, 1954.  (File No. 1-7296, Form 10-Q for
             June 1993, Nicor Gas, Exhibit 4-01.)

  4.11    *  Supplemental Indenture, dated August 15, 1994, of Nicor Gas to
             Continental Bank, Trustee, under Indenture dated as of January 1,
             1954.  (File No. 1-7296, Form 10-Q for September 1994, Nicor Gas,
             Exhibit 4.01.)

  4.12    *  Supplemental Indenture, dated October 15, 1995, of Nicor Gas to
             Bank of America Illinois, Trustee, under Indenture dated as of
             January 1, 1954.  (File No. 1-7296, Form 10-Q for September 1995,
             Nicor Gas, Exhibit 4.01.)

  4.13    *  Supplemental Indenture, dated May 10, 1996, of Nicor Gas to
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954.  (File No. 1-7296, Form 10-Q for June 1996,
             Nicor Gas, Exhibit 4.01.)

  4.14    *  Supplemental Indenture, dated August 1, 1996, of Nicor Gas to
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954.  (File No. 1-7296, Form 10-Q for June 1996,
             Nicor Gas, Exhibit 4.02.)




Nicor Inc.                                                           Page 44

Exhibit Index (continued)

Exhibit
 Number                           Description of Document                     

  4.15    *  Supplemental Indenture, dated June 1, 1997, of Nicor Gas to
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954.  (File No. 1-7296, Form 10-Q for June 1997,
             Nicor Gas, Exhibit 4.01.)

  4.16    *  Shareholder Rights Agreement, dated September 9, 1997, between
             the company and Harris Trust and Savings Bank, as Rights Agent. 
             (File No. 1-7297, Form 8-K for September 1997, Nicor Inc.,
             Exhibit 1.)

  4.17    *  Supplemental Indenture, dated October 15, 1997, of Nicor Gas to
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954.  (File No. 1-7296, Form 10-Q for September
             1997, Nicor Gas, Exhibit 4.01.)

  4.18    *  Supplemental Indenture, dated February 15, 1998, of Nicor Gas to  
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954.  (File No. 1-7296, Form 10-K for 1997, Nicor
             Gas, Exhibit 4.19.)

  4.19    *  Supplemental Indenture, dated June 1, 1998, of Nicor Gas to       
             Harris Trust and Savings Bank, Trustee, under Indenture dated as of
             January 1, 1954.  (File No. 1-7296, Form 10-Q for June 1998, Nicor
             Gas, Exhibit 4.01.)
             
  4.20    *  Supplemental Indenture, dated February 1, 1999, of Nicor Gas to   
             Harris Trust and Savings Bank, Trustee, under Indenture dated as
             of January 1, 1954. (File No. 1-7296, Form 10-K for 1998, Nicor
             Gas, Exhibit 4.19.)
             
             Other debt instruments are omitted in accordance with Item        
             601(b)(4)(iii)(A) of Regulation S-K.  Copies of such agreements
             will be furnished to the Commission upon request.

 10.01    *  Security Payment Plan.  (File No. 1-7297, Form 10-K for 1980,
             Nicor Inc., Exhibit 10-09.)

 10.02    *  1984 Nicor Officers' Capital Accumulation Plan Participation
             Agreement.  (File No. 1-7297, Form 10-K for 1988, Nicor Inc.,
             Exhibit 10-10.)

 10.02(a) *  1985 Nicor Officers' Capital Accumulation Plan Participation
             Agreement.  (File No. 1-7297, Form 10-K for 1988, Nicor Inc.,
             Exhibit 10-10(a).)

 10.03    *  1984 Nicor Directors' Capital Accumulation Plan Participation
             Agreement.  (File No. 1-7297, Form 10-K for 1983, Nicor Inc.,
             Exhibit 10-13.)




Nicor Inc.                                                           Page 45

Exhibit Index (continued)

Exhibit
 Number                           Description of Document                     

 10.03(a) *  1985 Nicor Directors' Capital Accumulation Plan Participation
             Agreement.  (File No. 1-7297, Form 10-K for 1984, Nicor Inc.,
             Exhibit 10-13(a).)

 10.04    *  Directors' Deferred Compensation Plan.  (File No. 1-7297,
             Form 10-K for 1983, Nicor Inc., Exhibit 10-16.)

 10.05    *  Directors' Pension Plan.  (File No. 1-7297, Form 10-K for 1985,
             Nicor Inc., Exhibit 10-18.)

 10.06    *  Flexible Spending Account for Executives.  (File No. 1-7297,
             Form 10-K for 1986, Nicor Inc., Exhibit 10-20.)

 10.07    *  Amendment and Restatement of the Nicor Gas Incentive Compensation
             Plan.  (File No. 1-7297, Form 10-K for 1986, Nicor Inc.,
             Exhibit 10-21.)

 10.08    *  Nicor Inc. 1989 Long-Term Incentive Plan.  (Filed with Nicor Inc.
             Proxy Statement, dated April 20, 1989, Exhibit A.)

 10.09    *  Nicor Gas Supplementary Retirement Plan.  (File No. 1-7297,
             Form 10-K for 1989, Nicor Inc., Exhibit 10-24.)

 10.10    *  Nicor Gas Supplementary Savings Plan.  (File No. 1-7297,
             Form 10-K for 1989, Nicor Inc., Exhibit 10-25.)

 10.11    *  Nicor Salary Deferral Plan.  (File No. 1-7297, Form 10-K for
             1989, Nicor Inc., Exhibit 10-29.)

 10.12    * 1995 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K     
            for 1994, Nicor Inc., Exhibit 10.17.)

 10.13    *  1996 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K
             for 1995, Nicor Inc., Exhibit 10.19.)

 10.14    *  Nicor Inc. Stock Deferral Plan.  (File No. 1-7297, Form 10-Q for
             September 1996, Nicor Inc., Exhibit 10.01.)

 10.15    *  Amendment to Nicor Inc. Stock Deferral Plan.  (File No. 1-7297,   
             Form 10-K for 1997, Nicor Inc., Exhibit 10.22.)

 10.16    *  Nicor Inc. 1995 Directors' Stock Plan.  (File No. 1-7297,
             Form 10-Q for September 1996, Nicor Inc., Exhibit 10.02.)

 10.17    *  1997 Nicor Inc. Incentive Compensation Plan.  (File No. 1-7297,
             Form 10-K for 1996, Nicor Inc., Exhibit 10.17.)

 10.18    *  1997 Nicor Gas Incentive Compensation Plan.  (File No. 1-7297,
             Form 10-K for 1996, Nicor Inc., Exhibit 10.18.)




Nicor Inc.                                                           Page 46

Exhibit Index (concluded)

Exhibit
 Number                           Description of Document                     

 10.19    *  1997 Long-Term Incentive Program.  (File No. 1-7297, Form 10-Q
             for March 1997, Nicor Inc., Exhibit 10.01.)

 10.20    *  Nicor Inc. 1997 Long-Term Incentive Plan.  (Filed as an appendix
             to the Nicor Inc. Proxy Statement, dated March 6, 1997.)

 10.21    *  1998 Nicor Incentive Compensation Plan.  (File No. 1-7297, Form
             10-K for 1997, Nicor Inc., Exhibit 10.23.)

 10.22    *  1998 Nicor Gas Incentive Compensation Plan.  (File No. 1-7297,
             Form 10-K for 1997, Nicor Inc., Exhibit 10.24.)

 10.23    *  1998 Long-Term Incentive Program.  (File No. 1-7297, Form 10-K
             for 1997, Nicor Inc., Exhibit 10.25.)

 10.24       1999 Nicor Incentive Compensation Plan.

 10.25       1999 Nicor Gas Incentive Compensation Plan.

 10.26       1999 Long Term Incentive Program.

             Exhibits 10.01 through 10.26 constitute management contracts and  
             compensatory plans and arrangements required to be filed as
             exhibits to this Form pursuant to Item 14(c) of Form 10-K.

 21.01    *  Subsidiaries.  (File No. 69-228, Form U-3A-2 for 1998, Nicor
             Inc., Item 1.)

 23.01       Consent of Independent Public Accountants.

 24.01       Powers of Attorney.

 27.01       Financial Data Schedule.

 99.01    *  Form of Letter to Shareholders relating to Shareholder Rights
             Agreement.  (File No. 1-7297, Form 8-K for September 1997, Nicor
             Inc., Exhibit 2.)

* These exhibits have been previously filed with the Securities and Exchange
  Commission as exhibits to registration statements or to other filings with
  the Commission and are incorporated herein as exhibits by reference.  The
  file number and exhibit number of each such exhibit, where applicable, are
  stated, in parentheses, in the description of such exhibit.

Upon written request, the company will furnish free of charge a copy of any
exhibit.  Requests should be sent to Investor Relations at the corporate
headquarters.