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     September 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 OCTOBER 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
                              (Unaudited)--September 30, 1997 and
<S>                                                                                                          <C>
                              December 31, 1996                                                                1

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

                           Condensed Consolidated Statements of Cash Flows
                              (Unaudited)--Nine Months Ended
                              September 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 8K                                                    13

</TABLE>




<PAGE>


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

                                                                                September 30,            December 31,
                                                                                    1997                     1996
                                                                                            (In Thousands)
                                     ASSETS
Current Assets:
<S>                                                                                 <C>                      <C>       
    Cash                                                                            $    1,724               $    2,316
    Notes receivable, primarily from affiliates                                        113,376                    -
    Accounts receivable                                                                 87,661                  103,736
    Inventories                                                                         24,773                   24,197
    Income taxes                                                                         2,255                      902
    Gas imbalance receivables                                                           12,244                   20,161
    Other                                                                                  899                    5,210
                                                                                    ----------               ----------
          Total Current Assets                                                         242,932                  156,522
                                                                                    ----------               ----------

Investments in Unconsolidated Affiliates and Other                                      74,741                   50,367
                                                                                    ----------               ----------

Plant, Property and Equipment                                                        2,416,808                2,422,845
    Less accumulated depreciation and amortization                                   1,507,488                1,539,984
                                                                                    ----------               ----------
                                                                                       909,320                  882,861
                                                                                    ----------               ----------

Deferred Charges and Other:
    Gas supply realignment costs                                                         5,156                   11,144
    Other                                                                              129,557                  130,251
                                                                                    ----------               ----------
                                                                                       134,713                  141,395
                                                                                    ----------               ----------
                                                                                    $1,361,706               $1,231,145
                                                                                    ==========               ==========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
    Long-term debt due within one year                                              $    6,004               $    6,964
    Notes payable to affiliates                                                          -                        1,189
    Accounts payable                                                                    40,557                   62,516
    Accrued income taxes                                                                 1,780                      184
    Other accrued taxes                                                                 13,551                    8,031
    Accrued interest                                                                    15,745                   17,015
    Gas imbalance payables                                                              20,487                   17,162
    Other                                                                                7,247                    8,217
                                                                                    ----------               ----------
          Total Current Liabilities                                                    105,371                  121,278
                                                                                    ----------               ----------

Long-Term Debt                                                                         405,536                  310,536
                                                                                    ----------               ----------

Deferred Credits and Other:
    Deferred income taxes                                                              130,932                  119,850
    Reserves for regulatory matters                                                      4,739                   14,644
    Other                                                                               91,109                   97,656
                                                                                    ----------               ----------
                                                                                       226,780                  232,150
                                                                                    ----------               ----------

Commitments and Contingencies

Stockholder's Equity:
    Common stock and other capital                                                      79,292                  100,674
    Retained earnings                                                                  544,727                  466,507
                                                                                    ----------               ----------
          Total Stockholder's Equity                                                   624,019                  567,181
                                                                                    ----------               ----------

                                                                                    $1,361,706               $1,231,145
                                                                                    ==========               ==========
</TABLE>

                             See accompanying notes.
<PAGE>

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

                                                                      Three Months                        Nine Months
                                                                    Ended September 30,                Ended September 30,
                                                              1997               1996           1997                1996
                                                                                     (In Thousands)
Revenues:
<S>                                                             <C>              <C>              <C>              <C>     
    Transportation and storage                                  $87,675          $89,415          $268,389         $273,250
    Other                                                         5,479            6,312            27,312           23,559
                                                                -------          -------          --------         --------
                                                                 93,154           95,727           295,701          296,809
                                                                -------          -------          --------         --------

Costs and Expenses:
    Operating and maintenance                                    20,440           24,646            60,241           66,916
    General and administrative                                   15,770           18,857            52,862           58,890
    Depreciation and amortization                                11,982           11,316            35,595           36,110
    Taxes, other than income                                      5,005            4,716            14,975           14,029
                                                                -------          -------          --------         --------
                                                                 53,197           59,535           163,673          175,945
                                                                -------          -------          --------         --------

Operating Income                                                 39,957           36,192           132,028          120,864

Other Income, Net:
    Equity in earnings of
       unconsolidated affiliates                                  2,716            2,341             8,113            7,236
    Other                                                           986            4,861             5,911            5,750
                                                                -------          -------          --------         --------
                                                                  3,702            7,202            14,024           12,986
                                                                -------          -------          --------         --------

Interest:
    Interest income, primarily
       from affiliates                                              326            1,311               515            4,566
    Interest expense                                             (7,151)          (8,401)          (21,525)         (30,696)
    Interest capitalized                                            462              303             1,318              599
                                                                -------          -------          --------         --------
                                                                 (6,363)          (6,787)          (19,692)         (25,531)
                                                                -------          -------          --------         --------

Income before Income Taxes                                       37,296           36,607           126,360          108,319

Income Tax Expense                                               14,206           13,729            48,582           41,356
                                                                -------          -------          --------         --------

Net Income                                                      $23,090          $22,878          $ 77,778         $ 66,963
                                                                =======          =======          ========         ========
</TABLE>












                             See accompanying notes.

<PAGE>

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

                                                                                               Nine Months
                                                                                          Ended September 30,
                                                                                     1997                       1996
                                                                                             (In Thousands)
Cash Flows from Operating Activities:
<S>                                                                                 <C>                       <C>      
    Net income                                                                      $  77,778                 $  66,963
    Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
          Depreciation and amortization                                                35,595                    36,110
          Deferred income taxes                                                        16,395                    43,537
          Equity in earnings of unconsolidated
              affiliates, less distributions                                           (3,613)                   (2,086)
          Reserves for regulatory matters                                              (9,905)                 (167,440)
          Gas supply realignment costs                                                  5,988                   177,958
          Change in:
              Accounts receivable                                                      12,741                    24,359
              Inventories                                                                (816)                   (5,791)
              Accounts payable                                                        (19,112)                   (9,579)
              Accrued interest and income taxes, net                                   (1,148)                   (8,167)
              Other current assets and liabilities                                     20,519                     7,236
          Other                                                                        (4,414)                  (73,035)
                                                                                    ---------                 ---------
              Net cash provided by operating
                 activities                                                           130,008                    90,065
                                                                                    ---------                 ---------

Cash Flows from Investing Activities:
    Plant, property and equipment additions                                          (100,503)                  (94,900)
    Notes receivable, primarily from affiliates                                      (110,817)                   62,872
    Other                                                                             (12,131)                    2,003
                                                                                    ---------                 ---------
              Net cash used in investing activities                                  (223,451)                  (30,025)
                                                                                    ---------                 ---------

Cash Flows from Financing Activities:
    Proceeds from issuance of long-term debt                                          100,000                      -
    Payments of long-term debt                                                         (5,960)                   (6,771)
    Changes in short-term borrowings                                                   (1,189)                  (14,980)
                                                                                    ---------                 ---------
       Net changes in debt                                                             92,851                   (21,751)
    Dividends paid                                                                       -                      (37,200)
                                                                                    ---------                 ---------
              Net cash provided by (used in)
                 financing activities                                                  92,851                   (58,951)
                                                                                    ---------                 ---------

Net Increase (Decrease) in Cash                                                          (592)                    1,089

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

Cash at End of Period                                                               $   1,724                 $   1,800
                                                                                    =========                 =========

Supplemental Disclosures of Cash Flow Information
Cash Paid for:
    Interest (net of amount capitalized)                                            $  20,715                 $  22,113
    Income taxes paid, net                                                             29,841                     3,648
</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 unaudited 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 nine months ended September 30, 1996, Sonat  Intrastate-Alabama had revenues
of  $4,905,000  and   $17,411,000  and  a  net  loss  of  $4,000  and  $546,000,
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                       Nine Months
                                                         Ended September 30,               Ended September 30,
                                                        1997             1996             1997             1996
                                                                             (In Thousands)

<S>                                                     <C>               <C>             <C>               <C>    
Revenues                                                $8,899            $8,924          $27,218           $27,117
Expenses:
    Operating expenses                                   1,157             1,262            3,519             3,797
    Depreciation                                         1,358             1,354            4,072             4,061
    Other expenses, net                                  1,269             1,441            3,849             4,335
                                                        ------            ------          -------           -------

Income Reported                                         $5,115            $4,867          $15,778           $14,924
                                                        ======            ======          =======           =======
</TABLE>



<PAGE>


4.       Debt and Notes To and From Affiliates

         Long-Term Debt - In September  1997,  Southern issued $100.0 million of
6.70 percent Notes due October 1, 2007, at 99.891 percent to yield 6.715 percent
under its shelf registration statement. The net proceeds were loaned to Sonat.

         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.

         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 September 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 September 30, 1997,  Southern's rates
are  established  by a  settlement  that was  approved by a FERC order issued in
1995.  All  of  its  customers  are  parties  to  the  settlement,   except  one
representing  approximately 2 percent of Southern's firm transportation volumes.
The  contesting  party has appealed the FERC's  approval of the  settlement  and
orders in the  proceedings to the United States  Circuit Court of Appeals.  (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.  By order dated  October 23,  1997,  the United  States  Court of
Appeals for the Fifth Circuit  vacated and remanded the FERC's  decision to deny
Sea Robin's  petition  and found that the FERC did not give enough  attention to
the  physical  and  operational  characteristics  of Sea Robin in  applying  the
primary  function  test.  The  petition  will  return  to the FERC  for  further
consideration.
<PAGE>

5.       Commitments and Contingencies (Cont'd)

         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.  On August 2, 1996,
the FERC issued an order on the  complaint,  instituting  an  investigation  and
hearing under Section 5 of the Natural Gas Act. 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. On
October 29, 1997,  the FERC issued an order on rehearing of the initial order in
the proceedings and found that Sea Robin's  proposed  settlement  rates are just
and  reasonable.  The rates will  become  effective  for  consenting  parties on
January 1, 1997, and for contesting parties on May 1, 1997.





<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).

         In connection with Southern's Destin Pipeline project,  the FERC issued
its Draft  Environmental  Impact Statement in July 1997. The pipeline,  which is
still subject to final FERC approval,  is expected to be partially completed and
in service in mid-1998.

         In April 1997 the FERC issued an order that permitted Southern to begin
construction  on a project  with an  estimated  capital cost of $36 million that
would add 46  million  cubic  feet per day of firm  capacity  for  customers  in
Georgia and  Tennessee.  Construction  began in late June,  and this project was
placed in service  on  November  1, 1997.  Southern  is also  moving  forward on
expansions  to eastern  Tennessee  and northern  Alabama that have a total filed
capital cost of $105 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  to change the route of the pipeline
as it crosses the Tennessee River.  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.

         In October 1997 AGL Resources  Inc. and Southern  entered into a letter
of intent to jointly  construct,  own and  operate a new  liquefied  natural gas
peaking facility, Etowah LNG, in Polk County, Ga. Under the agreement,  which is
subject to the  execution of  definitive  documents,  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. The new facility will cost approximately
$90 million,  with 3 billion cubic feet of natural gas storage  capacity and 450
million cubic feet per day of vaporization capacity. Affiliates of AGL Resources
will manage the  construction  of the  facility  and operate it.  Southern  will
provide  administrative  services. The companies plan to hold an open season for
Etowah LNG  subscriptions for peaking services in December 1997 and January 1998
and expect to file a certificate application with FERC in March 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
<TABLE>
<CAPTION>
                                                                    Three Months                       Nine Months
                                                                Ended September 30,                Ended September 30,
                                                               ---------------------              --------------------
                                                           1997             1996              1997              1996
                                                           ----             ----              ----              ----
                                                                                 (In Millions)
Revenues (1):
    Market transportation and
<S>                                                        <C>               <C>             <C>               <C>   
       storage                                             $74.9             $76.9           $232.7            $237.4
    Supply transportation                                   12.8              12.5             35.7              35.8
    Other                                                    5.4               6.3             27.3              23.6
                                                           -----             -----           ------            ------
       Total Revenues                                       93.1              95.7            295.7             296.8
                                                           -----             -----           ------            ------

Costs and Expenses (1):
    Operating and maintenance                               20.4              24.6             60.2              66.9
    General and administrative                              15.8              18.9             52.9              58.9
    Depreciation and amortization                           12.0              11.3             35.6              36.1
    Taxes, other than income                                 5.0               4.7             15.0              14.0
                                                           -----             -----           ------            ------
                                                            53.2              59.5            163.7             175.9
                                                           -----             -----           ------            ------
       Operating Income                                    $39.9             $36.2           $132.0            $120.9
                                                           =====             =====           ======            ======

Equity in Earnings of
    Unconsolidated Affiliates                              $ 2.7             $ 2.3           $  8.1            $  7.2
                                                           =====             =====           ======            ======

                                                                             (Billion Cubic Feet)
Volumes:
    Market transportation (2)                                 133              135               439              489
    Supply transportation                                     109               77               289              242
                                                             ----             ----              ----             ----
       Total Volumes                                          242              212               728              731
                                                             ====             ====              ====             ====
</TABLE>


Notes:

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

(2)      Volumes for Southern  for 1996 include 9 billion  cubic feet of gas for
         the  three-month  period  and 28  billion  cubic  feet  of gas  for the
         nine-month period associated with a small intrastate  pipeline that was
         transferred to Sonat on January 1, 1997, and are therefore not included
         in Southern's 1997 volumes.

<PAGE>

Third Quarter 1997 to Third Quarter 1996 Analysis

         Operating  income for Southern was $39.9  million  compared  with $36.2
million in the comparable 1996 period.  The improvement was primarily due to the
impact of recent  expansions,  lower operating  expenses and improved results at
Sea Robin Pipeline Company.

         Market  transportation  revenues decreased due primarily to a reduction
in  interruptible  volumes and the transfer of  Southern's  ownership of a small
intrastate  pipeline to Sonat, which was immaterial to operating results,  and a
favorable imbalance resolution in the 1996 period, partially offset by increased
revenue  from  expansions.  Supply  revenues  increased  due to higher  volumes.
Operating and  maintenance  expense  decreased  primarily due to cost  reduction
initiatives.  General and  administrative  expenses  decreased  primarily due to
lower  employee  benefit  expenses.  Sea Robin's  improved  results  were due to
increased throughput and lower operating and maintenance expense.

Nine Months 1997 to Nine Months 1996 Analysis

         Operating  income for Southern  was $132.0  million for the nine months
ended September 30, 1997, compared with $120.9 million for the nine months ended
September 30, 1996. The improvement was due to the impact of recent  expansions,
lower operating expenses and improved results at Sea Robin Pipeline Company.

         Market transportation revenues decreased due to lower volumes resulting
primarily  from warmer  weather and the  transfer of  Southern's  ownership of a
small intrastate  pipeline to Sonat,  which was immaterial to operating results,
partially  offset by increased  revenue from expansions.  Supply  transportation
revenues were flat as increased  volumes offset the effect of lower rates at Sea
Robin.  Operating  and  maintenance  expense  decreased  primarily  due to  cost
reduction initiatives.  General and administrative  expenses decreased primarily
due to lower stock-based compensation and employee benefit expenses. Sea Robin's
improved results were primarily due to lower operating and maintenance expense.

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 expire on
November 30, 1997,  following which Southern's  remaining gas supply will either
be used by Southern or 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.  Southern is a party to two market-priced  contracts with Exxon
Corporation  entered into in 1995 as part of a settlement  of certain  other gas
purchase contracts.  These contracts,  which terminate in November 1997, account
for 80  percent  of  Southern's  estimated  purchase  commitments  in the fourth
quarter of 1997, which total $40 million. Annual purchase commitments total less
than  $25  million  for  each  subsequent  year.  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.



<PAGE>


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                         Nine Months
                                                            Ended September 30,                 Ended September 30,
                                                           1997             1996              1997              1996
                                                                                (In Millions)

<S>                                                        <C>               <C>              <C>               <C>  
Other Income-Other                                         $ 1.0             $ 4.9            $ 5.9             $ 5.7
</TABLE>

         Other  Income-Other in both of the 1996 periods includes a $3.9 million
net gain on the partial  termination  of an interest rate swap.  The  nine-month
period  of 1997  includes  a $2.4  million  net gain on the  termination  of the
remainder of the interest rate swap. In addition,  the nine-month period of 1997
reflects higher levels of equity capitalized in Southern's construction programs
in the early part of the year.

<TABLE>
<S>                                                        <C>               <C>              <C>               <C>  
Interest Expense, Net                                      $ 6.4             $ 6.8            $19.7             $25.5
</TABLE>

         Net  interest  expense  decreased  in the  three-month  and  nine-month
periods  of 1997  due to  lower  interest  expense,  partially  offset  by lower
interest income. Interest expense decreased in both periods due to lower average
debt  levels,  and also  decreased  in the  nine-month  period due to much lower
average reserve balances. Interest income decreased in both periods due to lower
average  balances of loans to affiliates.  In addition,  the  nine-month  period
reflected lower GSR related interest income due to the 1996 Customer Settlement.

<TABLE>
<S>                                                        <C>               <C>              <C>               <C>  
Income Tax Expense                                         $14.2             $13.7            $48.6             $41.4
</TABLE>

         Income tax expense  increased in both  periods due to higher  levels of
income before income taxes.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

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

<S>                                                                                         <C>                <C>   
Operating Activities                                                                        $ 130.0            $ 90.1
</TABLE>

         Cash flow from operations  increased $39.9 million compared to the 1996
period.  The primary reasons for the increase were $34.0 million of cash refunds
paid to customers in the prior period and improved operating results in 1997.

         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.  The change in reserves for  regulatory  matters,
deferred  income  taxes,  accrued  income  taxes,  and other was also due to the
impact of the Customer Settlement,  which was essentially offsetting among these
captions.  The change in  accounts  payable was  primarily  due to the impact of
lower natural gas prices on gas purchases in the current  period.  The change in
other  current  assets and  liabilities  was  primarily  due to increases in gas
storage payables.

<TABLE>
<S>                                                                                         <C>                <C>    
Investing Activities                                                                        $(223.5)           $(30.0)
</TABLE>

         Net cash used in investing activities was $193.5 million higher in 1997
compared to 1996. The increase was primarily  attributable to increased loans by
Southern to its parent in the current period,  including the net proceeds of the
issuance of $100.0 million in notes,  compared to repayments in the prior period
to  Southern  from  its  parent.  In  addition,   the  current  period  includes
investments of $17.2 million in the Destin Pipeline joint venture.

<TABLE>
<S>                                                                                         <C>                <C>    
Financing Activities                                                                        $  92.9            $(59.0)
</TABLE>

         Financing  activities  provided $92.9 million in 1997 compared to using
$59.0  million in 1996.  The change was  primarily due to the issuance of $100.0
million  in notes in the  current  period  and  dividend  payments  in the prior
period.

Capital Resources

         At September 30, 1997,  Southern had lines of credit with a capacity of
$50 million.

         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.



<PAGE>


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*          Financial Data Schedules for the period ended September 30, 1997
------------
*  Filed herewith


(b)      Reports on Form 8-K

         The Company filed a report on Form 8-K on September 29, 1997, reporting
certain  information  under Item 5, with respect to the issuance and sale by the
Company  of  $100,000,000  aggregate  principal  amount of its  6.70%  Notes due
October 1, 2007, and furnishing certain related exhibits under Item 6.








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:        November 10, 1997              By:    /s/ Thomas W. Barker, Jr.
       ----------------------------               --------------------------
                                                  Thomas W. Barker, Jr.
                                                  Vice President-Finance




Date:        November 10, 1997              By:    /s/ Norman G. Holmes
       ----------------------------               ---------------------
                                                  Norman G. Holmes
                                                  Vice President & Controller