According to a recent report by ICF International, $641 billion in delivery and storage infrastructure is needed in the next 20-25 years to meet the demand of the growing North American energy market. Nearly half of that sum is needed to finance the estimated 35,000 miles of pipelines and 303,000 miles of gas gathering lines plus pumps and storage facilities. Do the math: That’s $30 billion a year in new infrastructure through 2035, roughly triple the amount invested over the past decade.
ICF economist Kevin Petak, author of this study, states that much of the investment will be front-loaded. “We’re in a heavy growth period right now. The next six years appear to be a pretty heavy period for expenditure and investment.”
Infrastructure Improvements and Expansion
Funding this infrastructure is only part of the near capital needs projections. The Quadrennial Energy Review (QER) by the Obama administration contains a telling Department of Energy finding: In 2040, Americans will still need oil and gas to meet 60% of their energy requirements.
Commenting on the QER, American Petroleum Institute Executive Vice President Louis Finkel said, “Essential infrastructure improvements in just the oil and natural gas area could, over the next decade, attract as much as $1.15 trillion in new private capital investment, support 1.15 million new jobs, and add $120 billion on average per year to our nation’s GDP.”
President Don Santa of the Interstate Natural Gas Association of America is confident that the capital for expansion exists. “Clearly there is a lot of interest in this space on the part of the capital markets,” Santa said. “Some years will be challenging (as) some of this is going to be front-loaded. But the track record gives us confidence that it is achievable.”
Master limited partnerships will play a significant role as this capital is raised. “The MLPs have been a very tax-efficient way of raising capital that has resulted in a lot of steel going into the ground,” Santa said. “There’s a demonstrated benefit to it.”
Investment Opportunities
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