Friday, May 6, 2016
The United States and Canada will require annual average midstream natural gas, crude oil, and natural gas liquids midstream infrastructure investment of about $26 billion a year, or $546 billion over the 21-year period from 2015 to 2035, a new study finds. The report, “North American Infrastructure Through 2035: Leaning Into the Headwinds,” conducted by ICF International on behalf of the INGAA Foundation, updates a 2014 infrastructure report to reflect the dynamic changes in the natural gas, NGL, and crude oil industry in recent years.
Natural gas infrastructure makes up more than 60% of the needed energy infrastructure in the report, with total investments of between $290 billion and $376 billion. Natural gas infrastructure includes gathering and transmission pipelines, compressors, laterals, gas-lease equipment, processing, storage, and LNG export facilities. Meanwhile, between $137 billion and $190 billion of crude oil infrastructure—gathering pipeline, lease equipment, mainline pipeline and pumping, storage laterals and storage tanks—and between $43 billion and $55 billion of new NGL infrastructure—transmission pipelines, pumping, fractionation, and NGL export facilities—will be required in the next 20 years.
ICF presents two scenarios, a high case characterized by a plausibly optimistic case for midstream infrastructure development, and a low case, a less-optimistic case in which a lower economic recovery reduces the need for oil and gas and pipeline development. The market growth projected in the two cases differs significantly. For natural gas, the low case projects gas use rising to 110 Bcfd by 2035, while the high case sees growth to more than 130 Bcfd. The biggest difference occurs in the power sector, where the low case assumes increased energy efficiency and significant penetration of non-gas generating resources.
The midstream investment projected in the report would add between $655 billion and $861 billion of value to the U.S. and Canadian economies and result in employment of 323,000 to 425,000 workers a year. While many of the jobs associated with midstream development are concentrated in the Southwestern and Northeastern U.S. and in Canada, the positive economic impacts are geographically widespread. The report also projects $25 billion in capital spending for incremental integrity management and emissions in the natural gas midstream space over the next 20 years.
The report’s high and low cases project natural gas prices to average below $3/MMBtu through 2017. In the high case, Henry Hub gas prices rise to between $4/MMBtu and $5.50/MMBtu after 2020; low case prices average 15% lower than the high case between 2020 and 2035. ICF assumes oil prices remain depressed through 2017, but rebound with an Asian economic recovery and slower development of North American oil supplies. In each case, oil prices recover to a longer-term price of $75/bbl, but the pace of recovery is much slower in the low case.
In the high case, electric load grows at 0.9% per year from 2016 to 2020, and at 1.0% per year after 2020. In the low case, electric load growth increases by only 0.3% per year throughout the projection. The report assumes U.S. gross domestic product (GDP) growth at an average 2.6% in the high case. In the low case, U.S. GDP grows at 2% per year from 2016 through 2025 and rebounds to 2.6% thereafter.
Natural gas infrastructure makes up more than 60% of the needed energy infrastructure in the report, with total investments of between $290 billion and $376 billion. Natural gas infrastructure includes gathering and transmission pipelines, compressors, laterals, gas-lease equipment, processing, storage, and LNG export facilities. Meanwhile, between $137 billion and $190 billion of crude oil infrastructure—gathering pipeline, lease equipment, mainline pipeline and pumping, storage laterals and storage tanks—and between $43 billion and $55 billion of new NGL infrastructure—transmission pipelines, pumping, fractionation, and NGL export facilities—will be required in the next 20 years.
ICF presents two scenarios, a high case characterized by a plausibly optimistic case for midstream infrastructure development, and a low case, a less-optimistic case in which a lower economic recovery reduces the need for oil and gas and pipeline development. The market growth projected in the two cases differs significantly. For natural gas, the low case projects gas use rising to 110 Bcfd by 2035, while the high case sees growth to more than 130 Bcfd. The biggest difference occurs in the power sector, where the low case assumes increased energy efficiency and significant penetration of non-gas generating resources.
The midstream investment projected in the report would add between $655 billion and $861 billion of value to the U.S. and Canadian economies and result in employment of 323,000 to 425,000 workers a year. While many of the jobs associated with midstream development are concentrated in the Southwestern and Northeastern U.S. and in Canada, the positive economic impacts are geographically widespread. The report also projects $25 billion in capital spending for incremental integrity management and emissions in the natural gas midstream space over the next 20 years.
The report’s high and low cases project natural gas prices to average below $3/MMBtu through 2017. In the high case, Henry Hub gas prices rise to between $4/MMBtu and $5.50/MMBtu after 2020; low case prices average 15% lower than the high case between 2020 and 2035. ICF assumes oil prices remain depressed through 2017, but rebound with an Asian economic recovery and slower development of North American oil supplies. In each case, oil prices recover to a longer-term price of $75/bbl, but the pace of recovery is much slower in the low case.
In the high case, electric load grows at 0.9% per year from 2016 to 2020, and at 1.0% per year after 2020. In the low case, electric load growth increases by only 0.3% per year throughout the projection. The report assumes U.S. gross domestic product (GDP) growth at an average 2.6% in the high case. In the low case, U.S. GDP grows at 2% per year from 2016 through 2025 and rebounds to 2.6% thereafter.
