Study: Oil, gas industry to invest billions in infrastructure in near future
The U.S. oil and gas industry is investing confidently in infrastructure in the near future, according to a recent report on infrastructure investments.
Those investments, of a projected $890 billion over the next 12 years, will pump the national economy with hundreds of thousands of jobs along with the ripple effects of a workforce with more spending money.
“It’s a time of optimism for the industry,” said James Fallon, director of downstream energy consulting at HIS Global Inc., which did the study.
The investments will break down into an especially strong year this year, carrying over from a “banner year” in 2013, and will sustain at annual investments of at least $80 billion in midstream and downstream infrastructure until 2020.
The report noted developing shale formation areas, such as the Bakken in North Dakota and Eagle Ford in Texas, will require more extensive investments in gathering and support facilities because they are not historic production regions.
That issue is ever present in the minds of Bakken industry players as flaring of natural gas, which often occurs because of a lack of a pipeline hookup to transport the gas, becomes a top problem.
The study, based on information directly and indirectly from producers, also predicted the pipeline infrastructure in 2015 will “have almost no resemblance” to the infrastructure in place in 2005.
It said pipelines will be the primary mover of oil and gas despite other methods increasing in popularity as of late. Investments in crude pipelines increased from $1.6 billion in 2010 to $6.6 billion last year.
The IHS report called 2013 a “milestone year” for investment in crude-dedicated railcars and loading or unloading facilities. Stark County commissioners recently approved rezoning for a new rail terminal five miles west of South Heart.
North Dakota Petroleum Council spokeswoman Tessa Sandstrom said the findings show the oil and gas industry’s impact on the state and national economy.
“I think it’s also important to note that the construction of this infrastructure does have a ripple effect that has helped create many new value-added business opportunities throughout the state,” Sandstrom wrote in an email, “leading to even larger secondary impacts across many of our state’s economic sectors.”
Sandstrom said there are already examples of this ripple effect across the state, such as the fertilizer plants in Jamestown and Grand Forks, and the manufacturing industry in Fargo where oilfield equipment is built.
“Those assets need to be constructed, they need materials, they need parts,” Fallon said. “Those parts need to be procured. So there’s an entire economic value chain built around constructing these assets.”
There’s also the ripple economic effect that comes from the increased workforce.
“They need to eat somewhere, they need to sleep somewhere, they need places to refill their vehicles, they need leisure activities,” Fallon said.
“When you employ somebody … there’s sort of a tangential effect.”
An overall theme of the changing infrastructure is a shift in the focus of the industry toward exports away from the historical infrastructure supporting imports, a relic of the now outdated focus on getting oil from elsewhere.
Jack Gerard, president of the American Petroleum Institute, which commissioned the study, highlighted the report’s projections for the economy in his State of American Energy address Tuesday.
The study, he said, found an annual average energy infrastructure investment of up to $95 billion would contribute as much as $120.58 billion to the U.S. gross domestic product, support as many as 1.15 million jobs and provide an additional $27.45 billion in government revenues on average, annually between 2014 and 2025.”