If the first half of the U.S. energy renaissance of the 21st century was primarily led by producers, the second half is being led in many ways by midstream operators. Indeed, the ability to fully capitalize on the multitude of new domestic crude, liquids and gas production depends on the timely investment in midstream infrastructure projects.

According to a recent report from the American Fuel & Petrochemical Manufacturers (AFPM), “The Fuel and Petrochemical Supply Chains – Moving the Fuels and Products That Power Progress,” midstream infrastructure isn't just essential to helping build domestic markets, but also in supporting exports that will help improve trade balances.

Since the shale revolution started in the early 2000s, midstream infrastructure has been growing to transport, process and refine these new volumes. According to the AFPM report, from 2010 to 2016, crude oil and NGL pipeline mileage increased by more than 25%.

Currently, U.S. midstream operators move about 43.3 million barrels per day (bbl/d) of crude, refined products and NGL, as well as 311 million pounds of plastic resins through various modes of transportation. These include pipelines, trucks, rail and barge.

Pipeline systems have been at the head of the table when it comes to midstream investment since much of the current oil and gas production takes place in plays that are far from processing plants and refineries. AFPM noted that in 2016, U.S. refineries received 10.2 million bbl/d of crude oil by pipeline and experienced a 30% increase in total crude receipts since 2010.

According to the U.S. Pipeline and Hazardous Materials Safety Administration, there are 76,000 miles of crude oil pipelines, 69,000 miles of NGL pipelines and 62,000 miles of refined product pipelines in operation in the U.S. As impressive as these figures are, the report says that further investment is necessary in both new pipeline systems, as well as to expand existing systems.

“[S]ignificant new investments are needed to ensure that these resources can be tapped to fuel our growing economy. Needed investments include the construction of new pipelines, as well as the expansion of existing systems,” the report said.

Infrastructure is already tight in various parts of the country at current production levels with pipeline bottlenecks, natural gas processing plants at or near fully capacity and refinery utilization expected to average 92% this year.

The U.S. Energy Information Administration (EIA) is forecasting domestic crude production will average a record 10.7 million bbl/d in 2018 and increase a further 15% over the next decade. The EIA also forecasts that NGL production will average 4.3 million bbl/d this year and increase a further 20% over the next ten years.

Increased production has also fueled new markets for oil, gas, liquids and resins exports. According to the U.S. International Trade Commission, waterborne exports of crude, NGL and refined products rose from 1.2 million bbl/d to nearly 5.4 million bbl/d from 2007 to 2017.

The U.S. Army Corps of Engineers reported that an average of 18.1 million bbl/d of crude oil, refined products and NGLs are transported via the country’s ports and waterways. These volumes included 7.2 million bbl/d of imports and 4.8 million bbl/d of exports. U.S. crude exports for domestically-produced volumes have only been unrestricted since 2015, consequently, these figures are expected to greatly increase in the coming years.

“Exports of refined products, crude oil and NGLs are expected to continue increasing over the next 10 years, requiring additional investment in America's system of ports and waterways, particularly along the Gulf Coast, where many export facilities are being constructed,” the report said.

Despite the pressing need for new midstream infrastructure, the time it takes for these projects to complete their environmental impact assessment has greatly increased since the start of the shale gale. According to the National Association of Environmental Professionals, it took a little over three years to complete these studies in 2000. By 2016, this time had increased to a little more than five years. It’s important to note that these averages do not include state and regional studies, which further lengthen the time it takes for projects to be approved.

“From the time a project is conceived of to the start of construction, a developer can expect years of paperwork, bureaucratic challenges and legal complications. Put simply, it often takes longer for the government to approve a project than it takes for a developer to build it,” AFPM said.

The report noted that while these studies are important, the current permitting processes and regulatory requirements often delay critical infrastructure development.

“Efforts to reform permitting processes should promote accountability for reviews and ultimately reduce the costs and burdens of delayed infrastructure projects by eliminating duplicative actions, ensuring consistency in reviews and providing timely and predictable review schedules,” the report said.

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