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, 1997

                                       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      1-2745

                          SOUTHERN NATURAL GAS COMPANY
             (Exact name of registrant as specified in its charter)

           DELAWARE                                          63-0196650
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)


           AMSOUTH-SONAT TOWER
           BIRMINGHAM, ALABAMA                                  35203
(Address of principal executive offices)                      (Zip Code)

Registrant's telephone number:                              (205) 325-7410


                                   NO CHANGE
(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 _

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

                         COMMON STOCK, $3.75 PAR VALUE:

                    1,000 SHARES OUTSTANDING ON JULY 31, 1997

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


<PAGE>


                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                              Page No.

PART I.       Financial Information

              Item 1.      Financial Statements

                           Condensed Consolidated Balance Sheets
<S>                                                                                                          <C>
                              (Unaudited)--June 30, 1997 and December 31, 1996                                 1

                           Condensed Consolidated Statements of Income
                              (Unaudited)--Three Months and Six Months Ended
                              June 30, 1997 and 1996                                                           2

                           Condensed Consolidated Statements of Cash Flows
                              (Unaudited)--Six Months Ended June 30, 1997 and 1996                             3

                           Notes to Condensed Consolidated Financial
                              Statements (Unaudited)                                                           4 - 6

              Item 2.      Management's Discussion and Analysis of
                              Financial Condition and Results of
                              Operations                                                                       7 - 12

PART II.      Other Information

              Item 6.      Exhibits and Reports on Form 8-K                                                   13
</TABLE>




<PAGE>

                                                       
                          PART I. FINANCIAL INFORMATION
Item 1.  Financial Statements
                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  June 30,               December 31,
                                                                                    1997                     1996
                                                                                            (In Thousands)
                                                        ASSETS
Current Assets:
<S>                                                                                 <C>                      <C>       
    Cash                                                                            $    1,667               $    2,316
    Notes receivable, primarily from affiliates                                         19,014                    -
    Accounts receivable                                                                 84,107                  103,736
    Inventories                                                                         29,002                   24,197
    Gas imbalance receivables                                                           12,572                   20,161
    Other                                                                                3,995                    6,112
                                                                                    ----------               ----------
          Total Current Assets                                                         150,357                  156,522
                                                                                    ----------               ----------

Investments in Unconsolidated Affiliates and Other                                      54,766                   50,367
                                                                                    ----------               ----------

Plant, Property and Equipment                                                        2,380,251                2,422,845
    Less accumulated depreciation and amortization                                   1,494,067                1,539,984
                                                                                    ----------               ----------
                                                                                       886,184                  882,861
                                                                                    ----------               ----------

Deferred Charges and Other:
    Gas supply realignment costs                                                         6,176                   11,144
    Other                                                                              120,228                  130,251
                                                                                    ----------               ----------
                                                                                       126,404                  141,395
                                                                                    ----------               ----------
                                                                                    $1,217,711               $1,231,145
                                                                                    ==========               ==========

                                         LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
    Long-term debt due within one year                                              $    6,324               $    6,964
    Notes payable to affiliates                                                          -                        1,189
    Accounts payable                                                                    39,033                   62,516
    Accrued income taxes                                                                 1,997                      184
    Other accrued taxes                                                                  9,988                    8,031
    Accrued interest                                                                    17,525                   17,015
    Gas imbalance payables                                                              10,131                   17,162
    Other                                                                                7,305                    8,217
                                                                                    ----------               ----------
          Total Current Liabilities                                                     92,303                  121,278
                                                                                    ----------               ----------

Long-Term Debt                                                                         305,536                  310,536
                                                                                    ----------               ----------

Deferred Credits and Other:
    Deferred income taxes                                                              124,071                  119,850
    Reserves for regulatory matters                                                      4,641                   14,644
    Other                                                                               92,903                   97,656
                                                                                    ----------               ----------
                                                                                       221,615                  232,150
                                                                                    ----------               ----------

Commitments and Contingencies

Stockholder's Equity:
    Common stock and other capital                                                      76,619                  100,674
    Retained earnings                                                                  521,638                  466,507
                                                                                    ----------               ----------
          Total Stockholder's Equity                                                   598,257                  567,181
                                                                                    ----------               ----------

                                                                                    $1,217,711               $1,231,145
                                                                                    ==========               ==========

</TABLE>


                             See accompanying notes.
<PAGE>

                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                   Three Months                        Six Months
                                                                  Ended June 30,                     Ended June 30,
                                                               --------------------               -----------------
                                                              1997               1996           1997                1996
                                                              ----               ----           ----                ----
                                                                                     (In Thousands)
Revenues:
<S>                                                            <C>              <C>               <C>              <C>     
    Transportation and storage                                 $ 86,950         $ 88,274          $180,714         $183,835
    Other                                                        16,431            7,707            21,833           17,247
                                                               --------         --------          --------         --------
                                                                103,381           95,981           202,547          201,082
                                                               --------         --------          --------         --------

Costs and Expenses:
    Operating and maintenance                                    22,170           22,410            39,801           42,270
    General and administrative                                   19,049           20,524            37,092           40,033
    Depreciation and amortization                                11,960           12,393            23,613           24,794
    Taxes, other than income                                      4,773            4,175             9,970            9,313
                                                               --------         --------          --------         --------
                                                                 57,952           59,502           110,476          116,410
                                                               --------         --------          --------         --------

Operating Income                                                 45,429           36,479            92,071           84,672

Other Income, Net:
    Equity in earnings of
       unconsolidated affiliates                                  2,701            2,340             5,397            4,895
    Other                                                           968              613             4,925              889
                                                               --------         --------          --------         --------
                                                                  3,669            2,953            10,322            5,784
                                                               --------         --------          --------         --------

Interest:
    Interest income, primarily
       from affiliates                                               43            1,331               189            3,255
    Interest expense                                             (7,063)         (11,159)          (14,374)         (22,295)
    Interest capitalized                                            348              211               856              296
                                                               --------         --------          --------         --------
                                                                 (6,672)          (9,617)          (13,329)         (18,744)
                                                               --------         --------          --------         --------

Income before Income Taxes                                       42,426           29,815            89,064           71,712

Income Taxes                                                     16,404           11,551            34,376           27,627
                                                               --------         --------          --------         --------

Net Income                                                     $ 26,022         $ 18,264          $ 54,688         $ 44,085
                                                               ========         ========          ========         ========
</TABLE>

















                             See accompanying notes.

<PAGE>

                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                               Six Months
                                                                                             Ended June 30,
                                                                                     1997                       1996
                                                                                             (In Thousands)
Cash Flows from Operating Activities:
<S>                                                                                  <C>                      <C>      
    Net income                                                                       $ 54,688                 $  44,085
    Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
          Depreciation and amortization                                                23,613                    24,794
          Deferred income taxes                                                         9,534                    38,690
          Equity in earnings of unconsolidated
              affiliates, less distributions                                             (897)                      255
          Gain on disposal of assets                                                     (262)                     -
          Reserves for regulatory matters                                             (10,003)                 (167,339)
          Gas supply realignment costs                                                  4,968                   174,947
          Change in:
              Accounts receivable                                                      16,294                    19,815
              Inventories                                                              (5,045)                   (4,109)
              Accounts payable                                                        (20,636)                   (9,211)
              Accrued interest and income taxes, net                                    2,978                   (21,563)
              Other current assets and liabilities                                      3,360                    (1,350)
          Other                                                                         5,319                   (57,368)
                                                                                     --------                 ---------
              Net cash provided by operating
                 activities                                                            83,911                    41,646
                                                                                     --------                 ---------

Cash Flows from Investing Activities:
    Plant, property and equipment additions                                           (59,037)                  (51,930)
    Notes receivable, primarily from affiliates                                       (16,455)                    4,430
    Proceeds from disposal of assets and other                                         (2,239)                      758
                                                                                     --------                 ---------
              Net cash used in investing activities                                   (77,731)                  (46,742)
                                                                                     --------                 ---------

Cash Flows from Financing Activities:
    Payments of long-term debt                                                         (5,640)                   (5,888)
    Changes in short-term borrowings                                                   (1,189)                   36,601
                                                                                     --------                 ---------
       Net changes in debt                                                             (6,829)                   30,713
    Dividends paid                                                                       -                      (24,800)
                                                                                     --------                 ---------
              Net cash provided by (used in)
                 financing activities                                                  (6,829)                    5,913
                                                                                     --------                 ---------

Net Increase (Decrease) in Cash                                                          (649)                      817

Cash at Beginning of Period                                                             2,316                       711
                                                                                     --------                 ---------

Cash at End of Period                                                                $  1,667                 $   1,528
                                                                                     ========                 =========

Supplemental Disclosures of Cash Flow Information
Cash Paid for:
    Interest (net of amount capitalized)                                             $ 12,438                 $  13,513
    Income taxes, net                                                                  23,249                    11,049

</TABLE>




                             See accompanying notes.


<PAGE>



                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       Basis of Presentation

         Southern Natural Gas Company (Southern) is a wholly owned subsidiary of
Sonat Inc.

         The  accompanying   condensed   consolidated  financial  statements  of
Southern  and its  subsidiaries  have  been  prepared  in  accordance  with  the
instructions to Form 10-Q and include the information and footnotes  required by
such instructions. In the opinion of management, all adjustments including those
of a normal  recurring  nature  have  been made  that are  necessary  for a fair
presentation of the results for the interim periods presented herein.

         The 1996 periods have been restated to reflect the  reclassification of
natural  gas sales,  natural  gas cost and  transition  cost  recovery  to other
revenues in the  Condensed  Consolidated  Statements  of Income.  Certain  other
amounts  in the 1996  condensed  consolidated  financial  statements  have  been
reclassified to conform with the 1997 presentation.

2.       Changes in Operations

         On January 1, 1997, Southern made a non-cash transfer of its investment
of $23,612,000 in Sonat  Intrastate-Alabama  Inc. to Sonat. For the three months
and six months ended June 30,  1996,  Sonat  Intrastate-Alabama  had revenues of
$5,482,000   and   $12,506,000   and  a  net  loss  of  $210,000  and  $542,000,
respectively.

3.       Unconsolidated Affiliates

         A subsidiary of Southern owns 50 percent of Bear Creek Storage Company,
an underground gas storage company. The following is summarized income statement
information  for Bear Creek.  No provision  for income  taxes has been  included
since its income taxes are paid directly by the joint-venture participants.

<TABLE>
<CAPTION>
                                                            Three Months                       Six Months
                                                           Ended June 30,                     Ended June 30,
                                                        1997             1996             1997             1996
                                                                             (In Thousands)

<S>                                                     <C>               <C>             <C>               <C>    
Revenues                                                $8,973            $8,952          $18,319           $18,193
Expenses:
    Operating expenses                                   1,120             1,370            2,361             2,535
    Depreciation                                         1,358             1,353            2,714             2,707
    Other expenses, net                                  1,248             1,408            2,581             2,894
                                                        ------            ------          -------           -------

Income Reported                                         $5,247            $4,821          $10,663           $10,057
                                                        ======            ======          =======           =======
</TABLE>



<PAGE>


4.       Debt and Notes To and From Affiliates

         Unsecured Notes - As part of Sonat's cash management program,  Southern
can  either  loan funds to or borrow  funds from  Sonat.  Notes  receivable  and
payable are in the form of demand notes with rates reflecting  Sonat's return on
funds loaned to its subsidiaries,  average short-term  investment rates and cost
of borrowed funds.  In certain  circumstances,  these notes are  subordinated in
right of payment to amounts  payable by Sonat  under  certain  long-term  credit
agreements. In September 1996 Southern began borrowing from its subsidiaries and
repaid its loan from Sonat.

         Southern  has  available  short-term  lines of  credit  of $50  million
through May 26, 1998. Borrowings are available for a period of not more than 364
days and are in the form of  unsecured  promissory  notes that bear  interest at
rates  based on the  banks'  prevailing  prime,  international  or  money-market
lending  rates.  At June 30, 1997, no amount was  outstanding  under  Southern's
agreement.

5.       Commitments and Contingencies

         Rate Matters - Periodically, Southern and its subsidiaries make general
rate filings with the Federal Energy Regulatory Commission (FERC) to provide for
the recovery of cost of service and a return on equity. The FERC normally allows
the filed rates to become  effective,  subject to refund,  until it rules on the
approved level of rates. Southern and its subsidiaries provide reserves relating
to such amounts collected  subject to refund,  as appropriate,  and make refunds
upon  establishment  of the final rates. At June 30, 1997,  Southern's rates are
established by a settlement with all of its customers  (except one  representing
approximately  2 percent of  Southern's  firm  transportation  volumes) that was
approved by a FERC order issued in 1995 and are not subject to refund. (See Rate
Matters in Item 2 of this report.)

         Sea Robin - In January 1995 Sea Robin Pipeline Company, a subsidiary of
Southern,  filed with the FERC a petition for a declaratory  ruling that the Sea
Robin  pipeline  system is  engaged  in the  gathering  of  natural  gas and is,
therefore,  exempt from FERC regulation  under the Natural Gas Act. In June 1995
the FERC denied Sea Robin's  petition on the basis that the primary  function of
the Sea Robin  system  is the  interstate  transportation  of gas.  Sea  Robin's
request for  rehearing  of that ruling was denied by the FERC on June 26,  1996.
Sea Robin filed on August 15, 1996,  for judicial  review of the orders  denying
its petition  and had oral  argument in its pending  appeal  before the Eleventh
Circuit on July 10, 1997.

         Following the filing of Sea Robin's petition for a gathering exemption,
several of the  shippers on the Sea Robin system filed with the FERC in February
1995 a  complaint  against  Sea Robin  under  Section 5 of the  Natural  Gas Act
claiming that Sea Robin's rates are unjust and unreasonable.  In its answer, Sea
Robin asked the FERC to dismiss the complaint or to find that its rates continue
to be just and reasonable based on the data it presented. On August 2, 1996, the
FERC issued an order on the complaint, instituting an

<PAGE>


5.       Commitments and Contingencies (Cont'd)

investigation  and hearing  under Section 5 of the Natural Gas Act and requiring
that an initial  decision be issued by May 2, 1997.  On December 31,  1996,  Sea
Robin filed a proposed settlement of the complaint  proceeding pursuant to which
it would  voluntarily  reduce its  transportation  rates by $.0042 per decatherm
(Dth), calculated on a 100 percent load factor basis, effective January 1, 1997.
The  settlement  was supported by the staff of the FERC and one of two groups of
active intervenors, but was opposed by the complainant shippers, the other group
of active  intervenors.  By order dated April 22,  1997,  the FERC  approved the
settlement with modifications,  making a merits determination as to the just and
reasonable rates to become effective for contesting and  non-contesting  parties
as of May 1, 1997. Under the FERC Order, Sea Robin's  transportation  rates were
reduced an  additional  $.006 per Dth,  calculated  on a 100 percent load factor
basis,  below the proposed  settlement rate level. Sea Robin sought rehearing of
the settlement order on May 22, 1997, arguing that the FERC improperly  modified
the  settlement  terms  as to  non-contesting  parties,  and that it  failed  to
properly consider Sea Robin's filed case in making its merits  determinations as
to contesting parties.





<PAGE>





Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

                          SOUTHERN NATURAL GAS COMPANY
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

         The principal  business of Southern Natural Gas Company  (Southern) and
its  subsidiaries  is  the  interstate   transmission  of  natural  gas  in  the
southeastern United States,  which is regulated by the Federal Energy Regulatory
Commission (FERC).

         Southern is  aggressively  seeking to expand its pipeline system in its
traditional market area and to connect new gas supplies.

         In March 1997 an amended application and tariff for the Destin Pipeline
was filed with the Federal Energy  Regulatory  Commission  (FERC) to reflect the
fact that units of Shell Oil  Company and Amoco  Corporation  have joined in the
ownership  of this 1 Bcf per day,  $300 million  pipeline  designed to transport
natural gas from the growing eastern Gulf of Mexico  production  area.  Southern
has a one-third interest in this pipeline. Shell and Amoco have made substantial
firm transportation  commitments to this pipeline,  and discussions are underway
with other  prospective  shippers.  In June 1997 the FERC  issued a  Preliminary
Determination,  subject to completion of its environmental review, that approved
the  construction  and operation of the Destin  Pipeline.  In July 1997 the FERC
issued its Draft Environmental  Impact Statement.  The pipeline,  which is still
subject to final FERC approval, is expected to be completed in mid-1998.

         In April 1997 the FERC issued an order that  permits  Southern to begin
construction  on a $36 million  project that will add 46 million  cubic feet per
day of firm capacity for customers in Georgia and Tennessee.  Construction began
in late  June,  and this  project  is  expected  to be in  service in late 1997.
Southern is also moving forward on expansions to eastern  Tennessee and northern
Alabama  that have a total  estimated  capital cost of $107  million.  The North
Alabama expansion,  which received FERC approval in May 1997, is now anticipated
to go in service in the fourth quarter of 1998. The East Tennessee  expansion is
anticipated  to go in service in November  1998,  subject to FERC approval of an
application that Southern filed in May 1997.



<PAGE>


Operations
<TABLE>
<CAPTION>

                                                                    Three Months                        Six Months
                                                                   Ended June 30,                     Ended June 30,
                                                                --------------------               -----------------
                                                           1997             1996              1997              1996
                                                           ----             ----              ----              ----
                                                                                 (In Millions)
Revenues (Note):
    Market transportation and
<S>                                                       <C>               <C>              <C>               <C>   
       storage                                            $ 74.6            $ 76.1           $157.8            $160.5
    Supply transportation                                   12.4              12.1             22.9              23.3
    Other                                                   16.5               7.8             21.9              17.3
                                                          ------            ------           ------            ------
       Total Revenues                                      103.5              96.0            202.6             201.1
                                                          ------            ------           ------            ------

Costs and Expenses (Note):
    Operating and maintenance                               22.2              22.4             39.8              42.3
    General and administrative                              19.1              20.5             37.1              40.0
    Depreciation and amortization                           11.9              12.4             23.6              24.8
    Taxes, other than income                                 4.8               4.2             10.0               9.3
                                                          ------            ------           ------            ------
                                                            58.0              59.5            110.5             116.4
                                                          ------            ------           ------            ------
       Operating Income                                   $ 45.5            $ 36.5           $ 92.1            $ 84.7
                                                          ======            ======           ======            ======

Equity in Earnings of
    Unconsolidated Affiliates                             $  2.7            $  2.3           $  5.4            $  4.9
                                                          ======            ======           ======            ======

                                                                             (Billion Cubic Feet)
Volumes:
    Market transportation                                     136              144               306              354
    Supply transportation                                     100               80               180              165
                                                             ----             ----             -----            -----
       Total Volumes                                          236              224               486              519
                                                             ====             ====             =====            =====

    Transition gas sales                                       17               18                35               35
                                                             ====             ====             =====            =====
</TABLE>


Note:    The 1996 periods have been restated to reflect the  reclassification of
         natural gas sales,  natural gas cost and  transition  cost  recovery to
         other revenues.


Second Quarter 1997 to Second Quarter 1996 Analysis

         Operating  income for Southern was $45.5  million  compared  with $36.5
million in the second quarter of 1996.  The  improvement is primarily due to the
impact of recent  expansions,  improved results at Sea Robin Pipeline Company, a
wholly owned subsidiary of Southern, and lower expenses. In addition,  operating
income  includes  the  adjustment  of a reserve due to a  favorable  ruling on a
royalty  issue.  The  reserve  adjustment,  net  of  other  out-of-period  items
including  depreciation and property tax adjustments and interest related to GSR
collection in 1996, increased operating income by $2.4 million.

         Market  transportation  revenues decreased due primarily to a reduction
in interruptible volumes, partially offset by increased revenue from expansions.
Supply transportation  revenues increased due to an expansion in firm service at
Southern and increased volumes at Sea Robin.  Excluding the out-of-period  items
mentioned above, operating and maintenance expense decreased due to cost cutting
measures.  General and administrative  expenses decreased primarily due to lower
stock-based compensation expense.

Six Months 1997 to Six Months 1996 Analysis

         Operating  income for Southern was $92.1  million  compared  with $84.7
million for the six months ended June 30, 1996.  The  improvement  was primarily
due to the same factors discussed above.

         Market transportation revenues decreased due to lower volumes resulting
primarily  from warmer  weather,  partially  offset by  increased  revenue  from
expansions.  Supply  transportation  revenues  decreased  somewhat  due to lower
transportation  rates at Sea  Robin,  partially  offset by higher  revenue  from
recent  expansions at Southern.  Operating and maintenance  expense decreased in
the  1997  period  due to cost  cutting  measures.  General  and  administrative
expenses decreased primarily due to lower stock-based  compensation and employee
benefit expenses.

Natural Gas Sales and Supply

         As a result of FERC Order No. 636, Southern  terminated or renegotiated
to market pricing substantially all of its gas supply contracts through which it
had historically  obtained its long-term gas supply.  Pending the termination of
the remaining supply contracts,  Southern is selling a portion of its gas supply
to a number of its firm transportation  customers under contracts that have been
extended  through  November 30, 1997. The remainder is sold on a  month-to-month
basis. Gas sales revenue and natural gas cost are included in other revenue.

         Southern currently is incurring no take-or-pay liabilities under any of
these contracts. Two market-priced contracts entered into with Exxon Corporation
in 1995 as part of a settlement of certain other gas purchase  contracts account
for 85 percent of Southern's  remaining estimated purchase  commitments in 1997,
which total $68 million. Annual purchase commitments total less than $20 million
for subsequent years. Based on Southern's  current  expectations with respect to
natural  gas  prices in the years  following  1997,  only a small  amount of gas
volumes are expected to be at prices above market.

Rate Matters

         A settlement  approved by the FERC in 1995  resolved all of  Southern's
previously  pending rate  proceedings  and  proceedings to recover GSR and other
transition  costs  associated  with the  implementation  of FERC Order No.  636,
except for one  contesting  party  that  represents  approximately  2 percent of
Southern's  firm  transportation  volumes.  That party has  appealed  the FERC's
approval of the  settlement  and orders in the  proceedings to the United States
Circuit Court of Appeals. As a contesting party under the settlement, that party
has also  challenged at FERC the  collection by Southern of  approximately  $6.3
million  in GSR costs  allocable  to it under  Order  No.  636.  The  settlement
provides that, except in certain limited circumstances, Southern will not file a
general rate case to be effective prior to March 1, 1998, but requires  Southern
to file a new rate case no later than September 1, 1999.




Other Income Statement Items
<TABLE>
<CAPTION>

                                                               Three Months                         Six Months
                                                              Ended June 30,                      Ended June 30,
                                                           1997             1996              1997              1996
                                                                                (In Millions)

<S>                                                        <C>               <C>              <C>               <C>  
Other Income-Other                                         $ 1.0             $ 0.6            $ 4.9             $ 0.9
</TABLE>

         Other  income-other  increased for the six-month  period of 1997 due to
the  recognition  of a gain on the  termination  of an  interest  rate swap.  In
addition,  both the  three-month  and six-month  periods of 1997 reflect  higher
levels of equity interest capitalized at Southern Natural.

<TABLE>
<S>                                                        <C>               <C>              <C>               <C>  
Interest Expense, Net                                      $ 6.7             $ 9.6            $13.3             $18.7
</TABLE>

         Net interest expense decreased in the three-month and six-month periods
of 1997 due to lower interest expense, slightly offset by lower interest income.
Interest expense decreased due to much lower average regulatory reserve balances
and lower average debt  balances.  Interest  income  decreased  primarily due to
lower  average  balances of loans to affiliates  and lower GSR related  interest
income.

<TABLE>
<S>                                                        <C>               <C>              <C>               <C>  
Income Tax Expense                                         $16.4             $11.6            $34.4             $27.6
</TABLE>

         Income tax expense  increased in the 1997 periods due to higher  pretax
income.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
<TABLE>
<CAPTION>
                                                                                                    Six Months
                                                                                                  Ended June 30,
                                                                                              1997              1996
                                                                                                   (In Millions)

<S>                                                                                           <C>               <C>  
Operating Activities                                                                          $83.9             $41.6
</TABLE>

         Cash flow from operations  increased $42.3 million compared to the 1996
period.  The primary  reasons for the increase was $35.0 million of cash refunds
to customers in the prior period and improved operations.

         Other  than the  refunds  discussed  above,  the  change in gas  supply
realignment  costs was attributable to the recording of the Customer  Settlement
in the  second  quarter  of 1996.  In  addition,  the  change  in  reserves  for
regulatory  matters,  deferred income taxes,  accrued interest and income taxes,
and other is due to the settlement accounting,  which was essentially offsetting
among these  captions.  The change in accounts  payable is primarily  due to the
accrual of cost for a contract termination in the 1996 period.

<TABLE>
<CAPTION>
                                                                                                    Six Months
                                                                                                  Ended June 30,
                                                                                              1997              1996
                                                                                                   (In Millions)

<S>                                                                                          <C>               <C>    
Investing Activities                                                                         $(77.7)           $(46.7)
</TABLE>

         Net cash used in investing  activities was $31.0 million higher in 1997
compared to 1996. The increased was primarily attributable to increased loans by
Southern  to its parent and to capital  expenditures,  which were  higher in the
current period due to system expansions at Southern Natural.

<TABLE>
<S>                                                                                          <C>               <C>   
Financing Activities                                                                         $ (6.8)           $  5.9
</TABLE>

         Financing  activities  used $6.8 million in 1997  compared to providing
$5.9 million in 1996.  The change was primarily due to loan  repayments of $36.6
million from Southern's parent,  offset by $24.8 million in dividend payments in
the 1996 period.

Capital Resources

         At June 30,  1997,  Southern had lines of credit with a capacity of $50
million. Southern also has a shelf registration with the Securities and Exchange
Commission for up to $200 million in debt securities,  of which $100 million has
been issued.

         Southern expects to continue to use cash from operations and borrowings
in the public or private markets or loans from affiliates to finance its capital
and other corporate expenditures.

FORWARD LOOKING STATEMENTS

         From  time  to  time  Southern  may  make  or  publish  forward-looking
statements  relating  to such  matters  as  anticipated  financial  performance,
business plans and prospects,  objectives, future projects, and similar matters.
This report  contains such  forward-looking  statements.  These  forward-looking
statements are based on assumptions  that Southern  believes are  reasonable.  A
variety  of  factors,   however,  could  cause  Southern's  actual  results  and
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations expressed in Southern's forward-looking statements.

         The success of Southern's  expansion projects is dependent on obtaining
both the necessary  number of customer  commitments for a project and regulatory
approval of the  project,  which may  encounter  opposition  by the staff of the
FERC,  environmental groups, local landowners,  and customers of Southern or its
local distribution customers. There can be no assurance that Southern's pipeline
projects will receive timely regulatory  approvals and be constructed and placed
into service on schedule.





<PAGE>



                           PART II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K

(a)      Exhibits1

Exhibit
Number                     Exhibits


12*               Computation of Ratio of Earnings to Fixed Charges

27.1*             Financial Data Schedules for the period ended June 30, 1997

27.2*             Restated  Financial  Data  Schedules for the periods ended 
                  March 31, 1997;  March 31, 1996;  June 30, 1996; 
                  September 30, 1996; and December 31, 1996

27.3*             Restated  Financial  Data  Schedules for the periods ended 
                  March 31, 1995;  June 30, 1995;  September 30, 1995; 
                  December 31, 1995; and December 31, 1994
------------
*  Filed herewith


(b)      Reports on Form 8-K

         The  Company  did not file any report on Form 8-K  during  the  quarter
ended June 30, 1997.


















1    The Company will  furnish to  requesting  security  holders the exhibits on
     this list  upon the  payment  of a fee of $.10 per page up to a maximum  of
     $5.00 per exhibit.  Requests  must be in writing and should be addressed to
     R. David Hendrickson,  Secretary,  Southern Natural Gas Company,  P. O. Box
     2563, Birmingham, Alabama, 35202-2563.

<PAGE>





                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES




                                   SIGNATURES





         Pursuant to the  requirements  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.



                                                 Southern Natural Gas Company



Date:         August 11, 1997             By:    /s/ Thomas W. Barker, Jr.
       ---------------------------               --------------------------
                                                 Thomas W. Barker, Jr.
                                                 Vice President-Finance




Date:         August 11, 1997             By:    /s/ Norman G. Holmes
       ---------------------------               ---------------------
                                                 Norman G. Holmes
                                                 Vice President & Controller