The importance of infrastructure in the midstream industry

Gas Processors Association held its 90th annual convention in San Antonio on April 3 – April 6. The conference had its highest attendance in years, over 1,800 attendees. Alan Armstrong, GPA’s president, opened the conference with his discussion on the midstream industry and focused on how important infrastructure is in this business. Before Mr. Armstrong began his speech, he was politely interrupted by “Marilyn Monroe” who came to the convention to wish GPA a happy 90th birthday. His comment after she left, “I have a very serious speech written here and I’ll have to get on with that.”

 Mr. Armstrong began by stating that the energy industry is a driving force in economic development and it plays a big role in politics and also the development of natural gas resources. This is big in helping sustain the US economy. One of the keys to developing the natural resources to the fullest is having sufficient midstream infrastructure. The challenge is to rapidly build and expand this infrastructure which is unfortunately rooted in technical and regulatory barriers. GPA has stepped up in recent years to take on these challenges. He gave thanks to those many individuals who have been involved in leadership roles and other GPA committees.

Mr. Armstrong went on to say that GPA is in a position to be a collective voice to ensure that the midstream industry connects the various components of production in the field to the best available markets efficiently. However, he commented that this is taken for granted – vast resources, infrastructure and the ability to maximize the use of these resources in the US. GPA needs to let the public know about what the midstream industry is doing and how it’s generating new jobs at all levels, as well as breathing new life into areas that haven’t seen any economic growth for some time.

Everyone is talking about natural gas, particularly the supply coming from shale. The natural gas supply that the president referenced last week is indeed not a “new” source of energy. However, in all fairness to the president, the “new” resources available to US consumers are a direct result of energy- industry innovations that have happened in the last decade. Another thing that the federal government takes for granted. Natural gas finally made the President’s list of clean energy; this is progress for natural gas. For too many years, natural gas has been left out of the energy mix.

Mr. Armstrong continued, stating how natural gas made Time Magazine’s, April 11th cover. The headline reads, “This rock can power the world, why shale gas can solve the energy crisis.” This is a big statement and how the industry is in the spotlight. However, in the corner, in small print were the words, “but drilling for it, threatens our land.” Mr. Armstrong correlated this statement with an article recently published in the weekend edition of the Wall Street. The article was written by Daniel Yergin, Chairman of CERA. The central theme of his article was how industry innovation and the abundance of shale gas can positively reshape the US energy picture. However, it will take time to sort out and develop sane appropriate regulations that are needed for public confidence in natural gas production and development operations. Mr. Yergin went on to say that, “If nothing else, it seems that natural gas is here or at least it’s coming.”

There is another part to the natural gas story that is key to the US’ ability to realizing the economic and environmental benefits of shale gas discoveries. These new supplies will require a tremendous amount of new midstream infrastructure. This is how GPA and the gas processing industry come into the picture - to change the fortunes not only in the US, but around the world. There are shale gas believers who have a hard time believing that infrastructure will get built in time to optimize the value of this new gas production.

Last year, Mr. Armstrong had a discussion with a CEO from a large utility company in the SE. They talked about the abundant supply from shale gas resources and how many utility companies have been slow to accept the shale gale. The power industry doubt was due in part since the utility companies were on the other side of the bubble, when gas prices just a few years ago were $12-$13/MMBtu when they had a lot of investment and were depending on the fuel. Now, the utility companies are on board with the production of shale resources, however, the CEO has concerns. Mr. Armstrong thought he would have issues with hydrofracturing. However, the CEO’s concerns were that infrastructure can’t be installed fast enough and the regulatory requirements around that. Mr. Armstrong’s statement, “Frankly, that’s a valid concern.”

There is plenty of industry support and money to build this infrastructure. Since 2005, $120 billion has been raised. So money won’t be a barrier to utilizing natural gas and infrastructure. But, it is less clear if the US can get a regulatory structure that is rational enough to allow these vital infrastructure projects to get built at a pace that keeps up with these new supplies. The industry and GPA have made real progress in the last few years in strategic advocacy. To construct and operate this critical infrastructure, it will require GPA to redouble its efforts. Mr. Armstrong emphasized, “We, the people in this room, must get engaged. The best way to accomplish this is for GPA to take the lead.”

The Author



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