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      March 31, 1998

                                       OR

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

For the transition period from                        to

Commission file number      1-2745

                          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 APRIL 30, 1998

     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.

<S>                                                                                                         <C>
PART I.           Financial Information

                  Item 1.      Financial Statements

                               Condensed Consolidated Balance Sheets
                                   March 31, 1998 and December 31, 1997                                       1

                               Condensed Consolidated Statements of Income
                                   Three Months Ended March 31, 1998 and 1997                                 2

                               Condensed Consolidated Statements of Cash Flows
                                   Three Months Ended March 31, 1998 and 1997                                 3

                               Notes to Condensed Consolidated Financial
                                   Statements                                                                 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>

                                                                                 March 31,              December 31,
                                                                                    1998                    1997
                                                                                          (In Thousands)
                                     ASSETS
Current Assets:
<S>                                                                               <C>                      <C>       
    Cash                                                                          $    4,175               $    2,905
    Notes receivable from affiliates                                                  68,475                   89,277
    Accounts receivable                                                               68,728                   78,248
    Inventories                                                                       19,527                   21,529
    Gas imbalance receivables                                                          9,279                   13,493
    Other                                                                              6,309                    4,250
                                                                                  ----------               ----------
          Total Current Assets                                                       176,493                  209,702
                                                                                  ----------               ----------

Investments in Unconsolidated Affiliates and Other                                   118,780                   97,054
                                                                                  ----------               ----------

Plant, Property and Equipment                                                      2,475,901                2,456,773
    Less accumulated depreciation and amortization                                 1,494,254                1,497,827
                                                                                  ----------               ----------
                                                                                     981,647                  958,946
                                                                                  ----------               ----------

Deferred Charges and Other                                                           104,763                  120,629
                                                                                  ----------               ----------
                                                                                  $1,381,683               $1,386,331
                                                                                  ==========               ==========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
    Long-term debt due within one year                                            $    5,000               $    6,220
    Accounts payable                                                                  23,698                   49,364
    Accrued income taxes                                                              14,293                    4,078
    Other accrued taxes                                                                4,011                    9,150
    Accrued interest                                                                  19,286                   20,028
    Gas imbalance payables                                                             7,830                   10,498
    Other                                                                              9,356                   10,493
                                                                                  ----------               ----------
          Total Current Liabilities                                                   83,474                  109,831
                                                                                  ----------               ----------

Long-Term Debt                                                                       400,000                  405,000
                                                                                  ----------               ----------

Deferred Credits and Other:
    Deferred income taxes                                                            143,573                  134,073
    Other                                                                             67,568                   85,734
                                                                                  ----------               ----------
                                                                                     211,141                  219,807
                                                                                  ----------               ----------

Commitments and Contingencies

Stockholder's Equity:
    Common stock and other capital                                                    79,495                   79,336
    Retained earnings                                                                607,573                  572,357
                                                                                  ----------               ----------
          Total Stockholder's Equity                                                 687,068                  651,693
                                                                                  ----------               ----------

                                                                                  $1,381,683               $1,386,331
                                                                                  ==========               ==========
</TABLE>

                             See accompanying notes.


<PAGE>


                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                            Three Months
                                                                                           Ended March 31,
                                                                                    1998                      1997
                                                                                           (In Thousands)
Revenues:
<S>                                                                                 <C>                       <C>    
    Transportation and storage                                                      $ 95,090                  $93,764
    Other                                                                             10,411                    5,402
                                                                                    --------                  -------
                                                                                     105,501                   99,166
                                                                                    --------                  -------

Costs and Expenses:
    Operating and maintenance                                                         19,558                   17,631
    General and administrative                                                        15,472                   18,043
    Depreciation and amortization                                                      5,491                   11,653
    Taxes, other than income                                                           5,349                    5,197
                                                                                    --------                  -------
                                                                                      45,870                   52,524
                                                                                    --------                  -------

Operating Income                                                                      59,631                   46,642
                                                                                    --------                  -------

Other Income, Net:
    Equity in earnings of unconsolidated affiliates                                    4,125                    2,696
    Other, net                                                                           653                    3,957
                                                                                    --------                  -------
                                                                                       4,778                    6,653
                                                                                    --------                  -------

Earnings Before Interest and Taxes                                                    64,409                   53,295
                                                                                    --------                  -------

Interest:
    Interest income, primarily from affiliates                                         1,399                      146
    Interest expense                                                                  (9,066)                  (7,311)
    Interest capitalized                                                                 473                      508
                                                                                    --------                  -------
                                                                                      (7,194)                  (6,657)
                                                                                    --------                  -------

Income Before Income Taxes                                                            57,215                   46,638

Income Tax Expense                                                                    21,999                   17,972
                                                                                    --------                  -------

Net Income                                                                          $ 35,216                  $28,666
                                                                                    ========                  =======
</TABLE>

















                             See accompanying notes.


<PAGE>


                  SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                            Three Months
                                                                                           Ended March 31,
                                                                                    1998                     1997
                                                                                           (In Thousands)
Cash Flows from Operating Activities:
<S>                                                                                 <C>                      <C>     
    Net income                                                                      $ 35,216                 $ 28,666
    Adjustments to reconcile net income to net
       cash provided by (used in) operating
       activities:
          Depreciation and amortization                                                5,491                   11,653
          Deferred income taxes                                                        9,500                    2,197
          Equity in earnings of unconsolidated
              affiliates, less distributions                                          (4,125)                  (2,696)
          Reserves for regulatory matters                                             (4,046)                     288
          Gas supply realignment costs                                                   353                    2,375
          Change in:
              Accounts receivable                                                      9,520                   21,379
              Accounts payable                                                       (25,667)                 (22,101)
              Accrued interest and income taxes, net                                  10,277                   14,027
              Other current assets and liabilities                                    (5,590)                  (5,985)
          Other                                                                       (3,278)                  (4,148)
                                                                                    --------                 --------
              Net cash provided by operating activities                               27,651                   45,655
                                                                                    --------                 --------

Cash Flows from Investing Activities:
    Plant, property and equipment additions                                          (25,619)                 (31,766)
    Notes receivable, primarily from affiliates                                       20,802                  (10,000)
    Proceeds from disposal of assets and other                                       (15,344)                   1,030
                                                                                    --------                 --------
              Net cash used in investing activities                                  (20,161)                 (40,736)
                                                                                    --------                 --------

Cash Flows from Financing Activities:
    Payments of long-term debt                                                        (6,220)                  (5,320)
    Changes in short-term borrowings                                                    -                      (1,188)
                                                                                    --------                 --------
              Net cash used in financing activities                                   (6,220)                  (6,508)
                                                                                    --------                 --------

Net Increase (Decrease) in Cash                                                        1,270                   (1,589)

Cash at Beginning of Period                                                            2,905                    2,316
                                                                                    --------                 --------

Cash at End of Period                                                               $  4,175                 $    727
                                                                                    ========                 ========

Supplemental Disclosures of Cash Flow Information
Cash Paid for:
    Interest (net of amount capitalized)                                            $  8,795                 $  8,421
    Income taxes, net                                                               $  1,321                 $    261
</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 is a wholly owned subsidiary of Sonat Inc.

         The  accompanying   condensed   consolidated  financial  statements  of
Southern  Natural  Gas and its  subsidiaries  (Southern)  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.

         Certain amounts in the 1997 condensed consolidated financial statements
and notes have been reclassified to conform with the 1998 presentation.

         In the  first  quarter  of  1998,  Statement  of  Financial  Accounting
Standards (SFAS) No. 130,  Reporting  Comprehensive  Income,  which  established
standards for reporting and display of comprehensive  income and its components,
became  effective  for  Southern.  Southern has no items of other  comprehensive
income that it is required to report under provisions of SFAS No. 130.

         SFAS No. 131,  Disclosures  about Segments of an Enterprise and Related
Information  also became  effective  for Southern in the first  quarter of 1998.
SFAS No. 131 establishes  standards for the way public enterprises are to report
information about operating segments and requires certain other disclosures.
Southern operates in one segment and implementation of SFAS No. 131 has minimal 
affect on its reporting.

2.       Unconsolidated Affiliates

     Southern Natural Gas owns a one-third  interest in Destin Pipeline Company,
L.L.C.  and a subsidiary  of Southern  Natural Gas 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.

                                           Three Months
                                          Ended March 31,
                                        1998                  1997
                                          (In Thousands)

    Revenues                           $9,029                $9,346
    Expenses:
       Operating expenses               2,301                 1,241
       Depreciation                     1,359                 1,356
       Other expenses, net              1,192                 1,333
                                       ------                ------

    Income Reported                    $4,177                $5,416
                                       ======                ======




<PAGE>
2.       Unconsolidated Affiliates (Cont'd)

         In April 1997, units of Shell Oil Company and Amoco Corporation  joined
with  Southern   Natural  Gas  in  the  ownership  of  Destin   Pipeline,   a  1
billion-cubic-feet-per-day,  $313 million pipeline designed to transport natural
gas from deep-water  development in the eastern Gulf of Mexico.  Construction of
the  pipeline  began  in  December  1997,  and it is  expected  to be  partially
completed  and in service  by July 1998 and fully in  service  by January  1999.
Destin's earnings of $6.2 million for the first quarter of 1998 primarily relate
to the allowance for funds used during construction capitalized on its pipeline.

3.       Debt and Notes To and From Affiliates

         As part of Sonat's cash management  program,  Southern  Natural Gas 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.

         At March 31, 1998,  Southern Natural Gas had short-term lines of credit
of $50.0 million available 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 March 31, 1998, no amounts were
outstanding.

4.       Rate Matters and Contingencies

         Periodically,  Southern  makes  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 provides reserves relating to such amounts collected subject to
refund, as appropriate,  and make refunds upon establishment of the final rates.
At March 31, 1998,  Southern  Natural Gas' rates are established by a settlement
that was approved by FERC orders  issued in 1995 and 1996.  All of its customers
are parties to the settlement.

         SFAS No. 71, Accounting for the Effects of Certain Types of Regulation,
provides  that  rate-regulated  entities  account  for  and  report  assets  and
liabilities  consistent with the economic effect of the way in which  regulators
establish  rates,  if the rates  established  are  designed to recover  costs of
providing  the regulated  service and if the  competitive  environment  makes it
reasonable to assume such rates can be charged and collected.  Certain  expenses
and  credits  subject to rate  determination  normally  reflected  in income are
deferred in the balance sheet and are recognized in income as the

<PAGE>


4.       Rate Matters and Contingencies (Cont'd)

related  amounts are included in service rates and recovered from or refunded to
customers. Information regarding Southern's regulatory assets and liabilities is
shown below:

                                   March 31,               December 31,
                                      1998                     1997
                                           (In Thousands)

    Regulatory Assets:
       SFAS No. 109 Tax Gross-Up    $20,352                 $19,801
       Unrecovered Depreciation      13,903                  13,853
       Work Force Reduction           7,847                   8,608
       Charitable Donation            7,671                   7,897
       Cash Out Differential          7,236                  12,449
       Other                          7,487                   8,398
                                    -------                 -------

                                    $64,496                 $71,006
                                    =======                 =======

    Regulatory Liabilities:
       Excess Deferred Taxes Due 
         Customers                  $ 4,903                 $ 5,291
                                    =======                 =======


         SFAS  No.  109 tax  gross  up is  recorded  pursuant  to FERC  policies
allowing future  recovery of taxes  associated with the allowance for funds used
during construction (AFUDC).  Unrecovered  depreciation represents amounts to be
recovered  in  future  rates  pursuant  to a  1992  FERC  settlement.  Cash  out
differential  is the  reserve for price  differential  associated  with  storage
transactions recoverable pursuant to Southern Natural Gas' customer settlement.
Excess deferred tax due customers  represents  amounts due customers pursuant to
federal tax rate normalization.





<PAGE>



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

RESULTS OF OPERATIONS

         The  principal  business  of  Southern  Natural  Gas  Company  and  its
subsidiaries  (Southern)  is the  transmission  and  storage of  natural  gas in
interstate  commerce in the  southeastern  United  States.  Southern is actively
pursuing  opportunities to expand its pipeline system in its traditional  market
areas and to connect new gas supplies.

         In April 1997, units of Shell Oil Company and Amoco Corporation  joined
with  Southern  in  the  ownership  of  Destin  Pipeline  Company,  L.L.C.,  a 1
billion-cubic-feet-per-day,  $313 million pipeline designed to transport natural
gas  from  deep-water  areas  in the  eastern  Gulf of  Mexico.  Southern  has a
one-third interest in this pipeline.  Shell and Amoco have made substantial firm
transportation  commitments  to this  pipeline.  Three other  shippers have also
dedicated their  production from certain leases in the eastern Gulf of Mexico to
Destin for  transportation  and discussions are under way with other prospective
shippers.  Construction  of the  pipeline  began  in  December  1997,  and it is
expected  to be  partially  completed  and in  service by July 1998 and fully in
service by January  1999.  In  February  1998 Destin  filed for  Federal  Energy
Regulatory   Commission   (FERC)   approval  to  extend  its   pipeline   system
approximately  14  miles to  transport  additional  gas  reserves  committed  to
Destin's system.  This extension,  which will cost approximately $19 million, is
expected to be in service in late 1998, subject to FERC approval.

         Southern is moving  forward on three  expansions to eastern  Tennessee,
northern  Alabama,  and central  Alabama that have a total filed capital cost of
$126 million.  The North Alabama expansion,  which received FERC approval in May
1997, is now  anticipated to go in service in the fall of 1999,  subject to FERC
approval of an  application  that Southern  filed in February 1998 to change the
route of the pipeline as it crosses the Wheeler National  Wildlife  Refuge.  The
122-mile  expansion will provide 76  million-cubic-feet-per-day  capacity to the
participating  customers.  A second  expansion  to serve  customers  in  eastern
Tennessee  received  FERC  approval  in April 1998 and is  anticipated  to go in
service in November 1998. Southern has firm transportation  commitments totaling
65  million  cubic  feet of  natural  gas  per day  from  customers  in  eastern
Tennessee,  Georgia and Alabama  related to this  expansion.  The  expansion  in
central Alabama  received FERC approval in March 1998 and is also expected to go
in service in the fourth quarter of 1998. This expansion will provide 34 million
cubic feet per day of firm transportation to Alabama Power Company and two other
customers.

         In December  1997,  an  affiliate of AGL  Resources,  Inc. and Southern
formed a new  entity,  Etowah  LNG  Company,  L.L.C.  (Etowah  LNG),  to jointly
construct,  own and operate a new liquefied natural gas peaking facility in Polk
County,  Georgia. Under the agreement,  AGL Resources and Southern each will own
50 percent of Etowah LNG,  which will be  regulated  by the FERC.  The  proposed
plant  will  connect  directly  into  AGL  Resources'   principal   natural  gas
distribution  subsidiary,  Atlanta Gas Light Company,  and Southern's  pipeline.
Etowah LNG will provide natural gas storage and peaking  services to Atlanta Gas
Light and other Southeastern  customers.  Peaking services provide  supplemental
gas supplies on days when demand is highest,  typically  during the winter.  The
new facility will cost approximately $90 million with 300 million cubic feet per
day of  deliverability  capacity.  Affiliates of AGL  Resources  will manage the
construction   of  the   facility   and  operate  it.   Southern   will  provide
administrative  services.  Etowah LNG filed a certificate  application  with the
FERC in April 1998. Subject to receiving timely FERC approval, construction will
begin in early  1999 in order to provide  peaking  services  during the  2001-02
winter heating season.


<PAGE>

Operations
                                                   Three Months
                                                  Ended March 31,
                                           1998                    1997
                                                   (In Millions)
Revenues:
    Market transportation and storage     $ 83.5                   $ 83.2
    Supply transportation                   11.6                     10.5
    Other                                   10.4                      5.4
                                          ------                   ------
       Total Revenues                      105.5                     99.1
                                          ------                   ------

Costs and Expenses:
    Operating and maintenance               19.6                     17.6
    General and administrative              15.5                     18.0
    Depreciation and amortization            5.5                     11.7
    Taxes, other than income                 5.3                      5.2
                                          ------                   ------
                                            45.9                     52.5
                                          ------                   ------
Operating Income                            59.6                     46.6
                                          ------                   ------
Other Income:
    Equity in earnings of
       unconsolidated affiliates             4.1                      2.7
    Other                                     .7                      4.0
                                          ------                   ------
                                             4.8                      6.7
                                          ------                   ------

Earnings Before Interest and Taxes        $ 64.4                   $ 53.3
                                          ======                   ======

                                               (Billion Cubic Feet)
Volumes:
    Market transportation                     185                      170
    Supply transportation                      95                       80
                                           ------                   ------
       Total Volumes                          280                      250
                                           ======                   ======

    Transition gas sales                        3                       18
                                           ======                   ======




<PAGE>


First Quarter 1998 to First Quarter 1997 Analysis

         Earnings before interest and taxes (EBIT) for the first quarter of 1998
increased  $11.1 million  compared with the prior year.  The increase was due to
increased  revenue from  expansions,  improved  operations at Sea Robin Pipeline
Company  and  other  quarter-to-quarter  variances  discussed  below.  Partially
offsetting the increase was lower other income in 1998.

         Supply  transportation  revenues  increased  due  to  an  expansion  at
Southern and higher volumes at Sea Robin.  Other revenue was up primarily due to
a reversal of certain  reserves  relating to Southern's  obligation to indemnify
certain parties in connection with take-or-pay  settlements  entered into in the
1980's. Operation and maintenance expense increased primarily due to higher fuel
expense.  General and  administrative  expense decreased  primarily due to lower
stock-based  compensation and employee benefit  expenses.  Depreciation  expense
decreased  primarily  due to an adjustment of the salvage value on certain fixed
assets.

         Equity in earnings of unconsolidated  affiliates  increased in 1998 due
to earnings of Destin Pipeline, primarily resulting from the allowance for funds
used during construction (AFUDC)  capitalized.  Other income was lower primarily
due to the  recognition of a gain on the termination of a forward rate agreement
in the 1997 period.

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's  remaining gas supply is sold on a
month-to-month  basis.  Gas sales  revenue and natural gas cost are  included in
other revenue.

         Southern's annual purchase  commitments total less than $25 million per
year for 1998 and subsequent  years.  Based on Southern's  current  expectations
with  respect to natural  gas  prices in 1998 and the years  following,  only an
insignificant amount of gas volumes is expected to be at prices above market.

Rate Matters

         Under terms of a  settlement  approved by the FERC,  all of  Southern's
previously  pending  rate  proceedings  and  proceedings  to recover  gas supply
realignment and other  transition costs  associated with the  implementation  of
FERC Order No. 636 have been resolved.  The settlement requires Southern to file
a new rate case no later than September 1, 1999.


                             ---------------------



<PAGE>

Other Income Statement Items
<TABLE>
<CAPTION>
                                                                                            Three Months
                                                                                           Ended March 31,
                                                                                    1998                     1997
                                                                                            (In Millions)

<S>                                                                                <C>                     <C>   
Interest Expense, Net                                                              $  7.2                  $  6.7
</TABLE>

         Net interest expense  increased in the 1998 period compared to the same
period last year due to higher average debt levels and higher  interest  expense
related to income taxes.  The effect of lower  interest rates on debt and higher
average loan  balances to  affiliates  slightly  offset the increase in interest
expense.
<TABLE>

<S>                                                                                <C>                     <C>   
Income Tax Expense                                                                 $ 22.0                  $ 18.0
</TABLE>

         Income tax expense  increased  in the 1998 period  compared to the 1997
period due to higher pretax income.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows
<TABLE>
<S>                                                                                <C>                     <C>   
Operating Activities                                                               $ 27.7                  $ 45.7
</TABLE>

         Cash flow from operations  decreased $18.0 million compared to the 1997
period.  The change in  depreciation  is primarily  due to an  adjustment of the
salvage  value on certain fixed  assets.  The change in  regulatory  reserves is
attributable to the reversal of royalty reserves discussed  earlier.  The change
in deferred taxes is primarily  attributable to the depreciation  adjustment and
reserve reversal discussed above, which were all non-cash.  Lower transition gas
sales  resulting from the  expiration of gas purchase  contracts was the primary
reason for the decrease in accounts  receivable.  Accounts payable decreased due
to lower gas purchases related to declining transition gas sales, and the timing
of storage gas purchases and intercompany settlements.
<TABLE>
<S>                                                                                <C>                     <C>    
Investing Activities                                                               $(20.2)                 $(40.7)
</TABLE>

         Net cash used in investing  activities  was $20.5  million less in 1998
compared to 1997.  The decrease was  primarily  attributable  to  repayments  of
intercompany  loans in the  current  period by  Southern's  parent,  Sonat Inc.,
compared to borrowings  on  intercompany  loans in the prior  period.  Partially
offsetting the change in intercompany loans were investments of $17.6 million to
the Destin Pipeline joint venture during 1998.



<PAGE>


<TABLE>
<CAPTION>
                                                                                            Three Months
                                                                                           Ended March 31,
                                                                                    1998                     1997
                                                                                            (In Millions)

<S>                                                                                <C>                     <C>    
Financing Activities                                                               $ (6.2)                 $ (6.5)
</TABLE>

         Net cash used in financing activities was essentially unchanged in 1998
compared to the 1997 period.

Capital Resources

         At March 31,  1998,  Southern  had bank  lines of  credit  with a total
capacity of $50.0  million,  all of which was  available.  Southern  has filed a
shelf registration  statement with the Securities and Exchange Commission which,
when  effective,  will provide for the issuance of up to $500.0  million in debt
securities.

     Southern's capital  expenditures and other investing  requirements for 1998
are budgeted to aggregate  $260 million.  This amount  reflects  investments  in
unconsolidated affiliates, expansions and other projects.

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

MARKET RISK

         Financial  instruments  of Southern  expose it to  interest  rate risk.
Southern's  entire  portfolio of interest rate risk instruments is classified as
non-trading.

         Southern's  interest  income is  sensitive  to  changes in the level of
short-term  interest rates in the United  States.  In general,  Southern  either
loans excess  funds to Sonat or repays its  short-term  borrowings.  Excess cash
generated  by  or  contributed  to  joint  venture  projects  is  invested  on a
short-term basis pending distribution or expenditure on capital projects.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

         This report contains  forward-looking  statements  regarding Southern's
business plans and prospects,  objectives,  expansion projects, proposed capital
expenditures  and  expected  performance  or  results.   These   forward-looking
statements are based on assumptions that Southern  believes are reasonable,  but
are subject to a wide range of risks and uncertainties and, as a result,  actual
results  may differ  materially  from those  expressed  in such  forward-looking
statements.  Important factors that could cause actual results to differ include
the  requirements  to receive  various  governmental  approvals  to proceed with
expansion projects at Southern,  Destin,  and Etowah.  Realization of Southern's
objectives  and  expected  performance  can also be  adversely  affected  by the
actions of customers  and  competitors,  changes in  governmental  regulation of
Southern's businesses,  and changes in general economic conditions and the state
of domestic capital markets.




<PAGE>


                           PART II. OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits(1)

Exhibit
Number                                      Exhibits


12*             Computation of Ratio of Earnings to Fixed Charges

27.1*           Financial Data Schedule for the period ended March 31, 1998

27.2*           Restated Financial Data Schedule for the period ended 
                December 31, 1997

-------------
*   Filed herewith


(b)      Reports on Form 8-K

         The  Company  did not file any report on Form 8-K  during  the  quarter
ended March 31, 1998.
















-------------------
(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:         May 13, 1998                By:    /s/ Thomas W. Barker, Jr.
       --------------------------               --------------------------
                                                Thomas W. Barker, Jr.
                                                Vice President-Finance



Date:         May 13, 1998                By:    /s/ Norman G. Holmes
       --------------------------               ---------------------
                                                Norman G. Holmes
                                                Vice President & Controller