UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 1-7584


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


        DELAWARE                                             74-1079400
 (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)                           IDENTIFICATION NO.)

    2800 POST OAK BOULEVARD
         P. O. BOX 1396
         HOUSTON, TEXAS                                          77251
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 215-2000

                                      NONE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
 REPORT)


         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  (OR FOR SUCH  SHORTER  PERIOD  THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),  AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X  NO
                                             ---   ---

 THE NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OUTSTANDING AS
OF JUNE 30, 1998 WAS 100.

REGISTRANT  MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTIONS  H(1)(a) AND
(b) OF FORM  10-Q AND IS  THEREFORE  FILING  THIS  FORM  10-Q  WITH THE  REDUCED
DISCLOSURE FORMAT.


<PAGE>



                                                    2



                                      PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:

TRANSCONTINENTAL GAS PIPE LINE CORPORATION AND SUBSIDIARIES (TRANSCO)

     The accompanying  interim condensed  consolidated  financial  statements of
Transco do not include all notes in annual  financial  statements  and therefore
should be read in conjunction  with the  consolidated  financial  statements and
notes  thereto  in  Transco's  1997  Annual  Report on Form 10-K and 1998  First
Quarter Report on Form 10-Q. The accompanying  consolidated financial statements
have not been audited by independent  auditors but include all adjustments  both
normal recurring and others which, in the opinion of Transco's  management,  are
necessary to present fairly its financial position at June 30, 1998, and results
of operations  for the three and six month periods ended June 30, 1998 and 1997,
and cash flows for the six months ended June 30, 1998 and 1997.

     Certain matters discussed in this report, excluding historical information,
include   forward-looking    statements.    Although   Transco   believes   such
forward-looking statements are based on reasonable assumptions, no assurance can
be given that every  objective  will be achieved.  Such  statements  are made in
reliance on the "safe harbor" protections  provided under the Private Securities
Reform  Act of 1995.  Additional  information  about  issues  that could lead to
material  changes in performance is contained in Transco's 1997 Annual Report on
Form 10-K and 1998 First Quarter Report on Form 10-Q.





<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEET
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                                    June 30,              December 31,
                                                                                      1998                    1997
                                                                                -----------------       -----------------
        
         ASSETS
<S>                                                                                  <C>                     <C>
Current Assets:
     Cash                                                                            $       988             $     1,321
     Receivables:
         Affiliates                                                                        1,127                     868
         Others                                                                           27,318                  27,493
     Advances to affiliates                                                              465,242                 281,454
     Transportation and exchange gas receivables:
         Affiliates                                                                       25,959                  23,567
         Others                                                                           66,932                  66,825
     Inventories                                                                          90,065                  84,240
     Deferred income tax asset                                                            89,782                  90,672
     Other                                                                                17,008                  17,570
                                                                                -----------------       -----------------
         Total current assets                                                            784,421                 594,010
                                                                                -----------------       -----------------

Investments                                                                                6,442                   7,072
                                                                                -----------------       -----------------
Property, Plant and Equipment:
     Natural gas transmission plant                                                    4,126,326               3,977,620
     Less-Accumulated depreciation and amortization                                      555,575                 477,667
                                                                                -----------------       -----------------
         Total property, plant and equipment, net                                      3,570,751               3,499,953
                                                                                -----------------       -----------------
Other Assets                                                                             171,809                 166,628
                                                                                -----------------       -----------------
                                                                                     $ 4,533,423             $ 4,267,663
                                                                                =================       =================




The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>








<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
                             (Thousands of Dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                   June 30,             December 31,
                                                                                     1998                   1997
                                                                                ----------------       ----------------

            LIABILITIES AND STOCKHOLDER'S EQUITY
   <S>                                                                                 <C>                    <C>

   Current Liabilities:
        Payables:
            Affiliates                                                              $    37,404            $    44,749
            Others                                                                       76,945                 90,486
        Transportation and exchange gas payables:
            Affiliates                                                                      380                    374
            Others                                                                       15,579                 18,033
        Accrued liabilities                                                             162,896                130,594
        Reserve for rate refunds                                                        275,157                204,554
                                                                                ----------------       ----------------
            Total current liabilities                                                   568,361                488,790
                                                                                ----------------       ----------------
   Long-Term Debt                                                                       975,972                837,832
                                                                                ----------------       ----------------
   Other Long-Term Liabilities:
        Deferred income taxes                                                           844,461                843,108
        Other                                                                           147,332                171,586
                                                                                ----------------       ----------------
            Total other long-term liabilities                                           991,793              1,014,694
                                                                                ----------------       ----------------

   Commitments and contingencies (Note 3)

   Common Stockholder's Equity:
        Common stock $1.00 par value:
            100 shares authorized, issued and outstanding                                     -                      -
        Premium on capital stock and other paid-in capital                            1,652,430              1,652,430
        Retained earnings                                                               344,867                273,917
                                                                                ----------------       ----------------
            Total common stockholder's equity                                         1,997,297              1,926,347
                                                                                ----------------       ----------------
                                                                                    $ 4,533,423            $ 4,267,663
                                                                                ================       ================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>



<PAGE>



--------------------------------------------------------------------------------
                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                            June 30
                                                                            ----------------------------------------
                                                                                  1998                   1997
                                                                            -----------------      -----------------
<S>                                                                         <C>                    <C>
Operating Revenues
   Natural gas sales                                                        $     143,237          $     151,952
   Natural gas transportation                                                     156,011                152,890
   Natural gas storage                                                             33,990                 34,561
   Other                                                                            1,008                    695
                                                                            -----------------      -----------------
        Total operating revenues                                                  334,246                340,098
                                                                            -----------------      -----------------

Operating Costs and Expenses:
   Cost of natural gas sales                                                      143,238                151,952
   Cost of natural gas transportation                                              10,758                  8,168
   Operation and maintenance                                                       38,346                 48,258
   Administrative and general                                                      31,396                 30,084
   Depreciation and amortization                                                   31,155                 39,275
   Taxes - other than income taxes                                                  8,713                  9,396
   Other                                                                              375                    212
                                                                            -----------------      -----------------
        Total operating costs and expenses                                        263,981                287,345
                                                                            -----------------      -----------------

Operating Income                                                                   70,265                 52,753
                                                                            -----------------      -----------------

Other (Income) and Other Deductions:
   Interest expense                                                                22,784                 16,125
   Interest income - affiliates                                                    (7,045)                (1,168)
   Allowance for equity and borrowed funds used during construction (AFUDC)        (2,654)                (1,543)
   Miscellaneous other deductions, net                                                119                    667
                                                                            -----------------      -----------------
        Total other deductions                                                     13,204                 14,081
                                                                            -----------------      -----------------

Income before Income Taxes                                                         57,061                 38,672

Provision for Income Taxes                                                         21,701                 14,917
                                                                            -----------------      -----------------

Net Income                                                                  $      35,360          $      23,755
                                                                            =================      =================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>




<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                       Six Months Ended
                                                                                            June 30
                                                                            ----------------------------------------
                                                                                  1998                   1997
                                                                            -----------------      -----------------
<S>                                                                         <C>                    <C>
Operating Revenues
   Natural gas sales                                                        $     275,957          $     311,461
   Natural gas transportation                                                     320,880                310,407
   Natural gas storage                                                             72,122                 71,152
   Other                                                                            4,658                  1,592
                                                                            -----------------      -----------------
        Total operating revenues                                                  673,617                694,612
                                                                            -----------------      -----------------

Operating Costs and Expenses:
   Cost of natural gas sales                                                      275,958                311,461
   Cost of natural gas transportation                                              20,952                 18,980
   Operation and maintenance                                                       82,740                 91,898
   Administrative and general                                                      61,389                 61,823
   Depreciation and amortization                                                   71,782                 78,069
   Taxes - other than income taxes                                                 17,786                 18,660
   Other                                                                              790                    804
                                                                            -----------------      -----------------
        Total operating costs and expenses                                        531,397                581,695
                                                                            -----------------      -----------------

Operating Income                                                                  142,220                112,917
                                                                            -----------------      -----------------

Other (Income) and Other Deductions:
   Interest expense                                                                45,389                 33,315
   Interest income - affiliates                                                   (13,643)                (2,298)
   Allowance for equity and borrowed funds used during construction (AFUDC)        (4,673)                (3,343)
   Miscellaneous other deductions, net                                                705                  1,235
                                                                            -----------------      -----------------
        Total other deductions                                                     27,778                 28,909
                                                                            -----------------      -----------------

Income before Income Taxes                                                        114,442                 84,008

Provision for Income Taxes                                                         43,492                 32,582
                                                                            -----------------      -----------------

Net Income                                                                  $      70,950          $      51,426
                                                                            =================      =================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>






<PAGE>



                                 TRANSCONTINENTAL GAS PIPE LINE CORPORATION


                               CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (Thousands of Dollars)
                                                (Unaudited)
<TABLE>
<CAPTION>

                                                                                                 Six Months Ended
                                                                                                     June 30
                                                                                         ---------------------------------
                                                                                             1998                1997
                                                                                         -------------       -------------
       <S>                                                                               <C>                 <C>
       Cash flows from operating activities:
          Net income                                                                     $   70,950          $   51,426
          Adjustments to reconcile  net income to net cash provided by (used in)
            operating activities:
              Depreciation and amortization                                                  74,572              81,744
              Deferred income taxes                                                           2,243                (881)
              Allowance for equity funds used during construction (AFUDC)                    (3,410)             (2,310)
              Changes in operating assets and liabilities:
                 Receivables                                                                 11,916              31,093
                 Receivables sold                                                           (12,000)                 -
                 Transportation and exchange gas receivables                                 (2,499)              6,396
                 Inventories                                                                 (5,825)            (30,247)
                 Payables                                                                   (11,290)            (45,518)
                 Transportation and exchange gas payables                                    (2,448)             (1,864)
                 Accrued liabilities                                                         32,302              18,885
                 Reserve for rate refunds                                                    70,603             (41,640)
                 Other, net                                                                 (27,207)             18,922
                                                                                         -------------       -------------
                       Net cash provided by operating activities                            197,907              86,006
                                                                                         -------------       -------------

       Cash flows from financing activities:
          Additions to long-term debt                                                       298,343                  -
          Retirement of long-term debt                                                     (160,000)            (99,000)
          Debt issue costs                                                                   (2,060)               (146)
          Dividends on common stock                                                              -               (2,319)
                                                                                         -------------       -------------
                       Net cash provided by (used in) financing activities                  136,283            (101,465)
                                                                                         -------------       -------------

       Cash flows from investing activities:
          Property, plant and equipment:
              Additions, net of equity AFUDC                                               (144,597)            (84,269)
              Changes in accounts payable and accrued liabilities                            (9,596)             (8,389)
          Advances to affiliates, net                                                      (183,788)            112,509
          Other, net                                                                          3,458              (4,945)
                                                                                         -------------       -------------
                       Net cash provided by (used in) investing activities                 (334,523)             14,906
                                                                                         -------------       -------------

       Net decrease in cash                                                                    (333)               (553)
       Cash at beginning of period                                                            1,321               1,774
                                                                                         =============       =============
       Cash at end of period                                                             $      988          $    1,221
                                                                                         =============       =============

       Supplemental disclosures of cash flow information:
          Cash paid (refunded) during the year for:
              Interest (exclusive of amount capitalized)                                 $   24,659          $   37,341
              Income taxes paid                                                              25,367              19,986
              Income tax refunds received                                                       (77)            (11,759)


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>

<PAGE>


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                       1. CORPORATE STRUCTURE AND CONTROL

      Transcontinental  Gas Pipe Line  Corporation  (Transco) is a  wholly-owned
subsidiary of Williams Gas Pipeline Company (WGP) (formerly Williams  Interstate
Natural Gas Systems,  Inc).  WGP is a  wholly-owned  subsidiary  of The Williams
Companies,  Inc.  (Williams).  Prior to May 1, 1997,  Transco was a wholly-owned
subsidiary of Williams.

                            2. BASIS OF PRESENTATION

      The condensed  consolidated  financial  statements include the accounts of
Transco and its majority-owned subsidiaries.  Companies in which Transco and its
subsidiaries  own 20  percent  to 50  percent  of the  voting  common  stock are
accounted for under the equity method.

      The condensed  consolidated  financial  statements have been prepared from
the books and records of Transco without audit. Certain information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles have been condensed or omitted.
These condensed  consolidated financial statements should be read in conjunction
with the  consolidated  financial  statements and the notes thereto  included in
Transco's  1997 Annual Report on Form 10-K and 1998 First Quarter Report on Form
10-Q.

      Through an agency agreement,  Williams Energy Services Company (WESCO), an
affiliate of Transco,  manages all jurisdictional merchant gas sales of Transco,
receives all margins  associated  with such  business  and, as Transco's  agent,
assumes  all market and credit risk  associated  with  Transco's  jurisdictional
merchant gas sales.  Consequently,  Transco's  merchant gas sales service has no
impact on its operating income or results of operations.

      Certain  reclassifications  have been made in the 1997  financial 
statements to conform to the 1998 presentation.

                    3. CONTINGENT LIABILITIES AND COMMITMENTS

      There have been no new developments from those described in Transco's 1997
Annual Report on Form 10-K or 1998 First Quarter  Report on Form 10-Q other than
as described below.



<PAGE>


RATE AND REGULATORY MATTERS

      GENERAL  RATE CASE  (DOCKET NO.  RP97-71)  On  November  1, 1996,  Transco
submitted to the Federal Energy Regulatory Commission (FERC) a general rate case
filing  principally  designed to recover costs associated with increased capital
expenditures.  These increased capital  expenditures  primarily relate to system
reliability, integrity and Clean Air Act compliance.

      When stated on a comparable basis, the rates Transco placed into effect on
May 1, 1997,  represent an annual cost of service increase of approximately  $47
million  over  the  cost  of  service  underlying  the  rates  contained  in the
settlement  of Transco's  last general rate filing  (Docket No.  RP95-197).  The
rates,   which  are  subject  to  refund,   are  designed   using  the  straight
fixed-variable rate design method.

      The filing also included (1) a pro-forma  proposal to roll-in the costs of
Transco's  Leidy Line and  Southern  expansion  incremental  projects  and (2) a
pro-forma  proposal to make  interruptible  transportation  (IT) backhaul  rates
equal to the IT  forward  haul  rates.  The  pro-forma  proposals  would be made
effective prospectively only after final FERC approval.

      On November 29, 1996, the FERC issued an order accepting Transco's filing,
suspending  its  effectiveness  until May 2, 1997 and  establishing a hearing to
examine the reasonableness of Transco's  proposed rates. In addition,  the order
consolidated  Transco's  pro-forma roll-in proposal with the Phase II hearing in
Docket  No.  RP95-197,  and  directed  that the  record  in that  proceeding  be
supplemented  to the extent  necessary.  On February 3, 1997, the FERC issued an
order on rehearing of its  November  29, 1996 order which,  among other  things,
revised the effective date for the proposed rates to May 1, 1997.

      On January  20,  1998,  Transco  filed a  Stipulation  and  Agreement  for
approval by the FERC, documenting a settlement with all of the active parties in
this  proceeding.  The settlement  resolves all cost of service,  throughput and
other issues in this proceeding,  except rate of return,  capital  structure and
certain minor cost allocation and rate design issues. On June 12, 1998, the FERC
issued an order approving the settlement. Transco is required to make refunds on
or before  October 30, 1998. The issues not resolved by the settlement are being
litigated by the parties before a FERC Administrative Law Judge (ALJ).

         GENERAL  RATE CASE (DOCKET NO.  RP95-197)  On July 29,  1998,  the FERC
issued  an order  on  rehearing  of its  August  1,  1997  order in the  Phase I
proceeding  determining the capital structure and rate of return for Transco. As
to capital  structure,  the FERC vacated its policy  formulated in the August 1,
1997 order which  favored use of the  pipeline's  own capital  structure  if the
pipeline's equity ratio falls within the range of the equity ratios of the proxy
companies  used to determine the  pipeline's  return on equity.  In the July 29,
1998  order,  the FERC  returned  to its  traditional  policy,  under  which the
pipeline's  own capital  structure  will be used if the pipeline  issues its own
non-guaranteed  debt and has its own bond rating,  and if the pipeline's  equity
ratio is reasonable  when compared to the equity ratios  approved by the FERC in
other  proceedings and when compared to those of the proxy  companies.  Applying
its new policy,  the FERC affirmed the use of Transco's  own capital  structure,
consisting  of 57.58%  equity,  in developing  Transco's  rate of return in this
proceeding.  As discussed in greater  detail  below,  the FERC also modified its
methodology for determining return on equity.  Applying its revised  methodology
to Transco in this proceeding,  the FERC provided a rate of return on equity for
Transco of 12.49%.  Transco had previously  provided a reserve which it believes
is adequate for any refunds that may be required.

         RATE OF RETURN  CALCULATION As noted above, on August 1, 1997, the FERC
issued an order  addressing,  among other things,  the authorized rate of return
for  Transco's  1995 rate case (Docket No.  RP95-197).  In that order,  the FERC
continued  its  practice of utilizing a  methodology  for  calculating  rates of
return that incorporates a long-term growth rate component. The long-term growth
rate component  used by the FERC is a projection of U.S. gross domestic  product
growth rates.  Generally,  calculating  rates of return  utilizing a methodology
which includes a long-term growth rate component results in rates of return that
are lower than they would be if the  long-term  growth rate  component  were not
included in the  methodology.  On January 30, 1998,  the FERC  convened a public
conference to explore, among other things,  possible modifications to the FERC's
rate of return  methodology.  As discussed  above, in its July 29, 1998 order on
rehearing  of its August 1, 1997  order,  the FERC  modified  its rate of return
methodology  with  regard  to the  weight  to be given to the  long-term  growth
component.  Under its  previous  methodology,  the FERC  averaged  the short and
long-term growth projections,  thereby giving them equal weight. In its July 29,
1998  order,  the FERC  changed  its  policy  and  will  accord  the  short-term
projection  a  two-thirds  weighting  and the  long-term  projection a one-third
weighting.  The  FERC has  determined  that the  short-term  projection  is more
reliable  and should be given more  weight,  but that the  long-term  projection
should be given some weight in order to normalize  any  distortions  that may be
reflected in the short-term  data. The revised  weighting to be reflected in the
FERC's methodology should lead to somewhat higher rates of return on equity than
were obtained  under the previous  methodology.  In addition,  the FERC will now
permit parties to argue that a pipeline's return on equity be established at any
point  within the range of returns  developed  under the  two-stage  methodology
(rather  than only at the  high,  mid or low  point in the  range)  based on the
pipeline's  relative level of risk. In that regard,  when assessing a pipeline's
relative risk, the FERC determined that it will not lower a pipeline's return on
equity if its lower risk is the result of the  pipeline's  own  efficiency,  but
will focus on risks faced by the pipeline that are attributable to circumstances
outside the control of the pipeline's management.

      GATHERING  FACILITIES  SPIN-DOWN  ORDER  (DOCKET  NOS.   CP96-206-000  AND
CP96-207-000)  In February 1996,  Transco filed an application with the FERC for
an order authorizing the abandonment of certain  facilities  located onshore and
offshore in Texas,  Louisiana  and  Mississippi  by  conveyance  to Williams Gas
Processing - Gulf Coast Company (Gas Processing),  an affiliate of Transco.  The
net book value  recorded  by Transco at  December  31,  1997 of the  facilities,
including the purchase  price  allocation  to Transco,  was  approximately  $529
million.  Estimated  operating  income  recorded  by Transco  for the year ended
December 31, 1997 associated with the facilities was $15 million;  however, such
operating  income may not be  representative  of the effects of the spin-down on
Transco's  future  operating  income due to various  factors,  including  future
regulatory   actions.   Concurrently,   Gas  Processing  filed  a  petition  for
declaratory  order  requesting a determination  that its gathering  services and
rates be exempt from FERC regulation under the Natural Gas Act. On September 25,
1996,  the  FERC  issued  an  order  dismissing  Transco's  application  and Gas
Processing's  petition for declaratory  order. On October 25, 1996,  Transco and
Gas  Processing  filed a joint request for rehearing of the FERC's  September 25
order,  and in August 1997 filed a request that rehearing be expedited.  Pending
the outcome of the rehearing request and in an effort to expedite abandonment of
at least a portion of the facilities  included in the February 1996 application,
in February  1998  Transco  filed a separate  application  with the FERC seeking
authorization  to abandon by conveyance  to Gas  Processing,  Transco's  onshore
Tilden/McMullen  gathering  system which is located in Texas. The net book value
at December 31, 1997 of the  Tilden/McMullen  facilities was  approximately  $25
million,  the  entirety of which is included in the $529  million net book value
for the facilities described in the February 1996 application.

      On  June 1,  1998,  the  FERC  issued  a  Notice  of  Inquiry  (NOI)  into
alternative  methods for regulating natural gas pipeline facilities and services
on the outer  continental  shelf.  The purpose of the NOI is to generate  public
comment  that will assist the FERC in  exploring  possible  alternatives  to the
FERC's current test used to determine whether offshore  pipeline  facilities and
services should be subject to the FERC's Natural Gas Act jurisdiction.

         REGULATION OF SHORT TERM NATURAL GAS TRANSPORTATION SERVICE (DOCKET NO.
RM98-10-000) AND REGULATION OF NATURAL GAS  TRANSPORTATION  SERVICES (DOCKET NO.
RM98-12-000)  On July 29, 1998, the FERC issued a Notice of Proposed  Rulemaking
(NOPR) and a Notice of  Inquiry  (NOI),  proposing  revisions  to,  and  seeking
comments on, its regulatory  policies for interstate  natural gas transportation
service.  In the NOPR (Docket No.  RM98-10-000),  the FERC proposes revisions to
its regulations to reflect  changes in the market for short-term  transportation
services on pipelines.  The FERC proposes to eliminate cost-based  regulation of
short-term  transportation  services and implement  regulatory policies that are
intended  to  maximize  competition  in the  short-term  transportation  market,
mitigate the ability of firms to exercise  residual  monopoly  power and provide
opportunities  for greater  flexibility  in the provision of pipeline  services.
Included  among  the  proposed   changes  are  initiatives  to  revise  pipeline
scheduling  procedures,   receipt  and  delivery  point  policies,  and  penalty
policies,  to require pipelines to auction  short-term  capacity,  to revise the
FERC's reporting requirements,  to permit pipelines to negotiate rates and terms
of service,  and to revise  certain rate and  certificate  policies.  In the NOI
(Docket No. RM98-12-000), the FERC seeks comments on its pricing policies in the
existing  long-term market and pricing  policies for new capacity.  The proposed
changes are expected to have prospective  effects only. Comments on the NOPR and
NOI are due within 90 days.  Transco  will  review the NOPR and NOI and  provide
comments within the required time period.

LEGAL PROCEEDINGS

      OTHER  LITIGATION In July 1996,  Canadian  Occidental of California  (CXY)
filed a lawsuit  against  Transco and certain  Transco  affiliates  demanding an
accounting relating to alleged take-or-pay deficiencies under seven gas purchase
contracts  for the years 1982 and 1983.  CXY  subsequently  amended its original
petition  to demand an  accounting  under the seven  contracts  through the year
1992. Transco answered the lawsuit asserting that the alleged  deficiencies were
settled in an agreement with CXY in 1986 or, alternatively,  that the claims are
barred by the  statute of  limitations.  On July 24,  1998,  the parties to this
lawsuit entered into a settlement  agreement resolving this matter.  Pursuant to
the terms of the settlement agreement, Transco made a cash payment to CXY, which
had no significant effect on Transco's results of operations.

SUMMARY

      While no  assurances  may be  given,  Transco  does not  believe  that the
ultimate  resolution of the foregoing  matters and those  described in Transco's
1997  Annual  Report on Form 10-K and 1998  First  Quarter  Report on Form 10-Q,
taken as a whole and after  consideration  of  amounts  accrued,  recovery  from
customers, insurance coverage or other indemnification arrangements, will have a
materially adverse effect upon Transco's future financial  position,  results of
operations and cash flow requirements.

                       4. DEBT AND FINANCING ARRANGEMENTS

LONG-TERM DEBT

      Williams and certain of its subsidiaries,  including Transco,  are parties
to a $1 billion credit  agreement  (Credit  Agreement),  under which Transco can
borrow up to $400 million.  Interest rates vary with current  market  conditions
based on the base rate of Citibank N.A., three-month  certificates of deposit of
major  United  States  money  market  banks,  federal  funds  rate or the London
Interbank  Offered  Rate.  As of  June  30,  1998,  Transco  had no  outstanding
borrowings under this agreement.

      On January 16, 1998,  Transco  issued $200 million of notes that mature on
January 15,  2005,  and $100  million of notes that mature on January 15,  2008,
which pay interest at 6-1/8% and 6-1/4%,  respectively,  per annum on January 15
and July 15 of each year,  beginning July 15, 1998. The notes are not subject to
redemption  and have no sinking fund  provisions.  Proceeds  from the notes were
used for general  corporate  purposes,  including  the repayment of $160 million
borrowed under the Credit Agreement.

SHORT-TERM DEBT

      Transco is a party to two short-term  money market  facilities under which
it can  borrow up to an  aggregate  of $90  million.  Interest  rates  vary with
current market conditions based on the applicable bank's rate at the time of the
borrowings.  As of June 30, 1998,  Transco had no outstanding  borrowings  under
these facilities.

SALE OF RECEIVABLES

      Transco  is a party to an  agreement  that  expires on  January  29,  1999
pursuant  to  which  Transco  can  sell to an  investor  up to $100  million  of
undivided  interests in certain of its trade  receivables.  At June 30, 1998 and
December 31, 1997, interests in $88 million and $100 million,  respectively,  of
these receivables were held by the investor.



<PAGE>


ITEM 2.       MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.

      The  following   discussion   should  be  read  in  conjunction  with  the
consolidated  financial  statements,  notes and management's  narrative analysis
contained in Items 7 and 8 of Transco's  1997 Annual  Report on Form 10-K and in
Transco's  1998  First  Quarter  Report  on Form  10-Q and  with  the  condensed
consolidated financial statements and notes contained in this report.

                              RESULTS OF OPERATIONS

NET INCOME AND OPERATING INCOME

      Transco's  net  income for the six  months  ended June 30,  1998 was $71.0
million  compared to net income of $51.4  million for the six months  ended June
30,  1997.  Operating  income for the six months  ended June 30, 1998 was $142.2
million  compared to $112.9  million for the six months ended June 30, 1997. The
higher  operating  income of $29.3  million was  primarily  the result of higher
natural gas transportation  and other revenues,  lower operation and maintenance
expenses and lower  depreciation and  amortization,  as discussed in more detail
below.  The increase in net income was  attributable to the increased  operating
income.  Net  interest  expense was  approximately  the same as the net interest
expense for the six months ended June 30, 1997.

      Because of its rate structure and historical maintenance schedule, Transco
typically experiences lower operating income in the second and third quarters as
compared to the first and fourth quarters.

OPERATING EXPENSES

      Excluding the cost of sales and transportation of $297 million for the six
months ended June 30, 1998 and $330 million for the  comparable  period in 1997,
Transco's  operating  expenses  for the six  months  ended June 30,  1998,  were
approximately  $17  million  lower  than the  comparable  period  in 1997.  This
decrease was primarily  attributable to lower operation and maintenance expenses
and lower  depreciation  and  amortization.  The lower operation and maintenance
expenses are primarily  attributable to a $6.3 million  decrease in charges from
others for the operation of certain Transco facilities, including a $4.1 million
adjustment  related to  settlement  rates  contained in the general rate case in
Docket No. RP97-71 approved by the FERC in June 1998; a $1.6 million  adjustment
in pipe recoating costs, also related to the RP97-71 settlement rates; and lower
costs of labor ($1.1 million),  contractual  services ($1.4 million),  materials
($1.3  million)  and  transportation  ($1.2  million);  partly  offset by a $3.2
million  increase in underground  storage expense and a $1.2 million increase in
lube oil and odorants  expense.  As described below, the increase in underground
storage  expense  was  largely  offset by an  increase  in  underground  storage
revenues.  The lower depreciation and amortization  resulted from a $3.2 million
adjustment  to  accruals  on certain  general  plant  assets and a $3.8  million
adjustment  related to the RP97-71  settlement  rates,  partly  offset by a $0.7
million increase due to recent capital expenditures included in the general rate
case in Docket No. RP97-71 and the expansion projects placed into service in the
last quarter of 1997.
<PAGE>

TRANSPORTATION REVENUES

      Transco's  operating revenues related to its  transportation  services for
the six months ended June 30, 1998 were $321  million,  compared to $310 million
for the six months ended June 30, 1997. The higher transportation  revenues were
primarily due to new rates to recover costs  associated  with increased  capital
expenditures  contained  in the general rate case in Docket No.  RP97-71  placed
into effect in May 1997,  benefits of the expansion projects placed into service
in November 1997 and a $2 million adjustment related to RP97-71 settlement rates
approved by the FERC in June 1998.

      As shown in the table below,  Transco's total  market-area  deliveries for
the six months ended June 30, 1998 increased 9.5 trillion  British Thermal Units
(TBtu) (1.4%) when compared to the same period in 1997. The increased deliveries
were mainly due to 27.5 TBtu delivered  under the Sunbelt  Expansion  Project in
the  first  six  months  of  1998,  offset  by  lower  long-haul  transportation
deliveries  due  to  milder  weather  conditions.   Transco's   production  area
deliveries for the six months ended June 30, 1998 decreased 22.6 TBtu (17%) when
compared to the same period in 1997 as a result of milder weather conditions.

      As a result of a straight  fixed-variable (SFV) rate design,  increases or
decreases  in firm  transportation  volumes  in  comparable  facilities  have no
significant  impact  on  operating  income;   however,   because   interruptible
transportation  rates  have  components  of fixed and  variable  cost  recovery,
increases or decreases in interruptible transportation volumes do have an impact
on operating income.


                                                             Six Months
                                                           Ended June 30,
                                                       ------------------------

Transco System Deliveries (TBtu)                         1998            1997
--------------------------------
                                                       ---------       --------


Market-area deliveries:
     Long-haul transportation                            450.3          472.2
     Market-area transportation                          252.3          220.9
                                                       ---------       --------
         Total market-area deliveries                    702.6          693.1
Production-area transportation                           108.2          130.8
                                                       =========       ========
         Total system deliveries                         810.8          823.9
                                                       =========       ========



Average Daily Transportation Volumes (TBtu)                4.5            4.6

Average Daily Firm Reserved Capacity (TBtu)                6.2            5.4


     Transco's facilities are divided into seven rate zones. Four are located in
the  production  area and  three  are  located  in the  market  area.  Long-haul
transportation is gas that is received in one of the  production-area  zones and
delivered in a market-area zone. Market-area  transportation is gas that is both
received and delivered within market-area zones. Production-area  transportation
is gas that is both received and delivered within production-area zones.

     See Note 3 of the Notes to Condensed  Consolidated Financial Statements for
a discussion of recent developments in Transco's rate and regulatory matters.
<PAGE>

SALES REVENUES

     Transco makes jurisdictional  merchant gas sales to customers pursuant to a
blanket  sales  certificate  issued by the FERC,  with most of those sales being
made  through a Firm Sales (FS)  program  which  gives  customers  the option to
purchase  daily  quantities of gas from Transco at  market-responsive  prices in
exchange for a demand charge payment.

     Through an agency agreement,  WESCO manages all jurisdictional merchant gas
sales of Transco,  receives all margins  associated  with such  business and, as
Transco's  agent,  assumes all market and credit risk  associated with Transco's
jurisdictional  merchant gas sales.  Consequently,  Transco's merchant gas sales
service has no impact on its operating income or results of operations.

     Transco's operating revenues for the six months ended June 30, 1998 related
to its sales services, including cash out sales in settlement of gas imbalances,
decreased  $35.5  million to $276  million,  when compared to the same period in
1997. The decrease was primarily due to a lower average gas sales price of $2.20
per dekatherm  (Dt) in the first six months of 1998 versus $2.41 per Dt in 1997.
However,  this decrease in revenues had no effect on Transco's  operating income
or net income  variances when compared to the prior year because the decrease in
revenues was offset by a corresponding decrease in the cost of sales.


                                                            Six Months
                                                          Ended June 30,
                                                     -------------------------

Gas Sales Volumes (TBtu)                               1998             1997
------------------------
                                                     --------         --------

Long-term sales                                         89.3             97.4
Short-term sales                                        14.7              5.0
                                                     ========         ========
     Total gas sales                                   104.0            102.4
                                                     ========         ========


STORAGE REVENUES

     Transco's  operating  revenues related to storage  services  increased $1.0
million to $72.1 million for the six months ended June 30, 1998 when compared to
the same period in 1997. This revenue increase  included $2.9 million to recover
higher underground storage rates charged by others that is included in operation
and maintenance expenses,  partly offset by a $1.5 million adjustment related to
settlement  rates  contained  in the  general  rate case in Docket  No.  RP97-71
approved by the FERC in June 1998.


<PAGE>



OTHER REVENUES

     Other operating revenues increased $3.1 million to $4.7 million for the six
months ended June 30, 1998 when compared to the same period in 1997,  due to new
services that began in July 1997 and increased liquids transportation.

                         CAPITAL RESOURCES AND LIQUIDITY

METHOD OF FINANCING

     Transco  funds its  capital  requirements  with cash flows  from  operating
activities,  including  the  sale of trade  receivables,  by  accessing  capital
markets,  by repayments of funds advanced to Williams,  by borrowings  under the
Credit  Agreement  and  short-term  money  market  facilities  and, if required,
advances from Williams.  At June 30, 1998, there were no outstanding  borrowings
under the Credit Agreement or short-term money market  facilities.  Advances due
Transco by Williams totaled $465 million.

     On January 16,  1998,  Transco  issued $200 million of notes that mature in
2005 and $100  million of notes that mature in 2008.  Proceeds  from these notes
were used for  general  corporate  purposes,  including  the  repayment  of $160
million borrowed under the Credit Agreement.

CAPITAL EXPENDITURES

     As shown in the table below,  Transco's  capital  expenditures  for the six
months ended June 30, 1998 were $154.2  million,  compared to $92.7  million for
the six months ended June 30, 1997.


                                                               Six Months

                                                             Ended June 30,
                                                         ----------------------

Capital Expenditures                                       1998          1997
--------------------
                                                         --------     ---------
                                                             (In Millions)

Market-area projects                                     $  53.2      $   31.9
Supply-area projects                                        78.6           7.3
Maintenance of existing facilities and other projects       22.4          53.5
                                                         ========     =========
      Total capital expenditures                         $ 154.2      $   92.7
                                                         ========     =========



      Transco's capital  expenditure budget for 1998 and future capital projects
are discussed in its 1997 Annual Report on Form 10-K and First Quarter Report on
Form 10-Q. The following  describes  significant  developments  related to those
projects and any new projects proposed by Transco.
<PAGE>

      INDEPENDENCE PIPELINE PROJECT In April 1998, Independence Pipeline Company
(Independence)  notified the FERC that it is revising  its  expected  in-service
date  from  November  1999  to  November  2000,  reflecting  the  status  of its
certificate  application  and the  anticipated  time  required to construct  the
pipeline project once it is authorized.  Independence also recently executed and
filed  with  the  FERC  a  precedent  agreement  with  a new  shipper  for  firm
transportation  service of up to 99,000 Dts of natural gas per day.  This brings
the level of capacity  subscribed on the  Independence  Pipeline to just over 68
percent.  In July 1998, the FERC determined that the Independence and MarketLink
projects are environmentally related and will be combined into one environmental
impact statement.

      MARKETLINK EXPANSION PROJECT On May 13, 1998, Transco filed an application
with the FERC for approval of its MarketLink  Expansion  Project with a targeted
in-service  date of November 1, 2000.  Nine  shippers  have  executed  precedent
agreements for terms of up to 15 years for  approximately 95 percent of the firm
capacity  created  by the  project.  As  noted  above,  in July  1998,  the FERC
determined that the  Independence  and MarketLink  projects are  environmentally
related and will be combined into one environmental impact statement.

      CUMBERLAND  PIPELINE PROJECT Cumberland Gas Pipeline Company  (Cumberland)
held an open season from March 30 to May 29,  1998,  for parties  interested  in
subscribing to firm transportation  capacity.  Cumberland plans to file for FERC
approval  of the  project  during the fourth  quarter  of 1998.  The  project is
expected to be in service by the 2000-2001 winter heating season.

      SOUTH COAST EXPANSION PROJECT Transco announced that it is holding an open
season  from  July 22,  1998 to August  24,  1998,  for  parties  interested  in
subscribing to its South Coast Expansion  Project,  which will create additional
firm transportation  capacity from the terminus of Transco's existing Mobile Bay
Lateral in Choctaw  County,  Alabama,  to mainline  delivery points in Transco's
Rate Zone 4 (Alabama and  Georgia).  Transco  plans to file for FERC approval of
the project during the first quarter of 1999.  The project has a target
in-service date of November 1, 2000.

MOBILE BAY LATERAL  EXPANSION  PROJECT In January  1998,  the FERC  approved the
Mobile Bay Lateral  Expansion  Project,  an expansion and extension of Transco's
existing  123-mile  Mobile Bay  Lateral.  The project is expected to provide new
firm  transportation  capacity  of 350 MMcf per day from the  outer  continental
shelf to  Transco's  Station 82 and increase  capacity on the  existing  onshore
lateral  from 520 MMcf per day to 784 MMcf per day.  The project  will be placed
into  service in two phases:  Phase I was placed into service on August 1, 1998,
and Phase II is targeted to be placed into service on November 1, 1998.

OTHER CAPITAL REQUIREMENTS AND CONTINGENCIES

      Transco's capital requirements and contingencies are discussed in its 1997
Annual  Report on Form 10-K and 1998 First  Quarter  Report on Form 10-Q.  Other
than as  described in Note 3 of the Notes to  Condensed  Consolidated  Financial
Statements,  there  have  been  no new  developments  from  those  described  in
Transco's  1997 Annual Report on Form 10-K and 1998 First Quarter Report on Form
10-Q with regard to other capital requirements and contingencies.
<PAGE>

      RATE  AND  REGULATORY  REFUNDS  Transco  has  provided  reserves  which it
believes is adequate for any rate refunds  that may be required.  In  connection
with the settlement in its general rate case under Docket No.  RP97-71  approved
by the FERC by order dated June 12, 1998, Transco expects to make refunds, which
it currently  estimates  to be in a range of $70 million to $90 million,  in the
fourth quarter of 1998.

      YEAR 2000 COMPLIANCE  Williams and its  wholly-owned  subsidiaries,  which
includes Transco,  has initiated an enterprise-wide  project to address the year
2000  compliance  issue  for all  technology  hardware  and  software,  external
interfaces with customers and suppliers,  operations process control, automation
and  instrumentation  systems and facility  items.  The inventory and assessment
phases  of  this  project  are  complete.  Necessary  conversion,   testing  and
replacement  activities have begun and will continue through  mid-1999.  Transco
has initiated a formal  communications  process with other  companies with which
Transco's  systems  interface or rely on to determine  the extent to which those
companies  are  addressing  their  year 2000  compliance,  and where  necessary,
Transco  will be working with those  companies to mitigate any material  adverse
effect to Transco.

      Transco  expects  to utilize  both  internal  and  external  resources  to
complete this process.  Costs  incurred for new software and hardware  purchases
will be  capitalized  and other costs will be expensed  as  incurred.  While the
total cost of this project is still being evaluated, Transco currently estimates
that the cost, excluding  previously planned system  replacements,  necessary to
complete the project  within the schedule  described  will be  approximately  $4
million  to  $6  million.  Transco  will  update  this  estimate  as  additional
information becomes available. The costs of the project and the completion dates
are based on management's best estimates,  which were derived utilizing numerous
assumptions of future events,  including the continued  availability  of certain
resources, third party year 2000 modification plans and other factors. There can
be no guarantee  that these  estimates will be achieved and actual results could
differ materially from these estimates.

CONCLUSION

      Although no assurances can be given,  Transco currently  believes that the
aggregate of cash flows from operating activities, supplemented, when necessary,
by repayments of funds advanced to Williams,  advances or capital  contributions
from Williams and  borrowings  under the Credit  Agreement or  short-term  money
market  facilities,  will provide Transco with sufficient  liquidity to meet its
capital requirements.  Transco also expects to access public and private markets
on reasonable terms to finance its capital requirements.
<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.      LEGAL PROCEEDINGS.

             See  discussion  in Note 3 of the Notes to  Condensed  Consolidated
             Financial Statements included herein.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K.

             (a)   Exhibits.

                   None

             (b) Reports on Form 8-K.

                   None





<PAGE>




                                    SIGNATURE


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.




                                             TRANSCONTINENTAL GAS PIPE LINE
                                             CORPORATION (Registrant)




Dated:  August 13, 1998                       By /s/ James C. Bourne
                                              --------------------------

                                              James C. Bourne
                                              Controller
                                              (Principal Accounting Officer)











<PAGE>