The People of America's Oil and Natural Gas Indusry

Investing in Energy Infrastructure, Investing in America

Mark Green

Mark Green
Posted April 15, 2014

Last month a new study said more than $640 billion in energy infrastructure investments will be needed in the U.S. over the next two decades. Needed are pipelines, pumps and other infrastructure to keep pace with expected increases in domestic oil and natural gas production, the ICF International report said – much of it coming from energy reserves found in shale and other tight-rock formations through advanced hydraulic fracturing and horizontal drilling. ICF:

Sufficient infrastructure goes hand in hand with well-functioning markets. Insufficient infrastructure can constrain market growth and strand supplies, potentially leading to increased price volatility and reduced economic activity.

infrastructure_needsAt left is a breakdown of the investment projections from the report – about evenly divided between the needs for oil and natural gas development, with nearly 10 percent of the total projected for natural gas liquids. ICF on natural gas investments:

The current study … projects significant development of natural gas infrastructure to accommodate the rapidly growing gas supplies from shale. Thus, much new gas gathering and pipeline infrastructure will be needed well into the future.

And for investments in oil infrastructure:

… a number of newer oil- and liquids-rich plays, such as the Eagle Ford and Niobrara, have entered the development fray, and are adding to the incremental oil and liquids development over time. The enhanced oil and liquids development has created ample opportunity for new midstream infrastructure and significantly increased the level of investment in oil and liquids transport versus estimates.

Though the numbers may seem daunting, they represent opportunity as well – opportunity for growth in America’s oil and natural gas capacities and increased efficiency that benefits consumers. Of course, capital spending equals economic stimulus as the need for materials and equipment spur new business for fabricators, suppliers and transporters. There’s also job creation – in industry itself and in support and associated sectors.

An IHS study released late last year quantified growth we’ve already seen from capital investments in oil and natural gas infrastructure over the past two years – from $56.3 billion in 2010 to $89.6 billion in 2013. IHS projects increased domestic energy production will, in fact, drive infrastructure investment and growth from 2014 to 2025:

  • $94 billion to $120 billion added to U.S. GDP
  • $59 billion to $75 billion in labor income
  • 900,000 to more than 1.1 million jobs supported
  • $21 billion to $27 billion in revenues generated for government

IHS:

Driven by growth in U.S. natural gas, natural gas liquids, and crude oil, the past 2 years have witnessed rapid growth in direct capital investment toward oil and gas infrastructure assets. … This increase in capital spending has provided both an economic stimulus and an incisive data point into how shale driven oil and gas production is reshaping the U.S. oil and gas infrastructure landscape. … The results of the IHS analysis determine that this recent surge in oil and gas transportation and storage infrastructure investment is not a short lived phenomenon. Rather, we find that a sustained period of high levels of oil and gas infrastructure investment will continue through the end of the decade.

The good news is America’s oil and natural gas companies have been making these kinds of investments and will continue investing as energy opportunities emerge. These could include domestic development and growth in overseas demand for U.S. liquefied natural gas and crude oil – provided government policies allow exports of these commodities.

American energy means choices for Americans – the opportunity to continually modernize development, delivery and storage infrastructure in this country and to facilitate the free trade of U.S. commodities to friends overseas. The investments that will make these things happen represent investments for Americans – consumers as well as those who work for or support our industry.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.