Changes in the North American energy sector mean the US and Canada will need to invest nearly $30 billion annually – or $641 billion between now and 2035 – on natural gas, crude oil, and natural gas liquids (NGLs) midstream infrastructure, a new study has found.
According to the report – “North American Midstream Infrastructure through 2035: Capitalising on our Energy Abundance” – new infrastructure will be required to move natural gas, NGLs, and crude oil from areas where production is expected to grow to areas where demand is expected to increase.
The report looks at NGLs and crude oil as well as natural gas because of the linkage that exists among the three commodities, making it necessary to view energy pipelines in holistic terms, according to Don Santa, president of the INGAA Foundation, the Washington DC organisation that co-sponsored the study along with America’s Natural Gas Alliance.
ICF International, which conducted the report on the INGAA Foundation's behalf, provided a breakdown of required investment by commodity.
Midstream natural gas accounted for the greater part of the annual $30 billion estimate, requiring about $14.2 billion a year in investment to accommodate new gas supplies, particularly from the prolific shale plays. Required infrastructure includes mainlines, processing and storage facilities, and gathering lines.
NGLs will require $2.5 billion of investment a year for transmission pipelines, pumping, fractionation and NGL export facilities.
Required investment in crude oil infrastructure was at similar levels to that of natural gas, requiring $12.4 billion a year for gathering pipelines, mainline pipeline and pumping, and storage tanks.
“Pipelines make the shale revolution possible – whether it’s shale gas, tight oil or NGLs,” Santa said. “Without pipelines, Americans cannot benefit from these bountiful US resources,” he added.
In 2012, the lack of necessary infrastructure resulted in the venting and flaring of 212.85 billion cubic feet, according to the US Energy Information Administration.
“This report shows a vibrant natural gas market in the future, and it also demonstrates the need for additional midstream infrastructure to support natural gas fulfilling its potential as a foundation fuel for our energy economy,” Santa said.
According to the report, the total midstream investment would create 432,000 jobs, add approximately $885 billion to the US and Canadian economies, and bring in over $300 billion in federal, state/provincial, and local taxes.
The $641 billion estimate is based on 2012 dollar terms assuming real natural gas prices that average around $6 per MMBtu (one million British thermal units) over the long term.
Founded in 1990 by the Interstate Natural Gas Association of America, the INGAA Foundation works to facilitate the efficient construction and safe operation of the North American natural gas pipeline system. It also promotes natural gas infrastructure development worldwide.
ICF International provides advisory and implementation services to government and commercial clients in the following sectors: energy, environment, infrastructure, health, consumer/financial, public safety and defense.