Bringing new U.S. oil and gas supply online continues to be constrained by takeaway operators who are trying to catch up on an estimated $1 trillion of needed midstream buildout.

“Midstream is huge,” Bill Marko said at Hart Energy’s recent A&D Strategies and Opportunities conference in Dallas. Marko is a managing director for investment banker Jefferies LLC.

Marko estimated that the remaining upstream spend needed to develop U.S. resource plays is between $2 trillion and $2.5 trillion. The corresponding midstream spend, he estimates, is about $1 trillion.

“We’re in the early stage in the boom in midstream. Midstream will be the key to controlling the pace of upstream development,” he added.

The ongoing lack of infrastructure to keep up with growing oil, NGL and gas production has resulted in recent blowouts in the differential price for Permian Basin oil and Marcellus-play gas, he noted.

Tudor, Pickering, Holt & Co. (TPH) analysts reported in September that “The outlook for 2015 realizations on intra-basin production are looking worse for operators in the southwestern Marcellus and Utica, in our opinion. This is a marginally negative change to our view from just a few months ago, as we see upside bias to production following our recent update to basin models and a downgrade to takeaway capacity, given pipeline startup delays.”

The TPH analysts are optimistic, however. “Indications increasingly point toward an all-clear date in 2017 for both northern and southern [Appalachian] producers.”

Marko told conference attendees, “Infrastructure is real interesting to talk about…You have blowouts, such as a $21 [per barrel] differential in the Permian, which I think surprised a lot of people, and then, last winter, you had the $2-plus differential in the Northeast in the Marcellus. If you’re thinking about where it will happen next, just think about where there is high growth—not from 10,000 to 20,000 bbl/d but where production is growing from 200,000 to 400,000 bbl/d, where infrastructure is not keeping up.”

Deborah Byers, U.S. oil and gas practice leader for Ernst & Young, said at the conference that midstream merger and acquisition activity in the past 10 quarters has totaled some $100 billion. As for new-build, the firm forecasts—based on data from IHS and the American Petroleum Institute—that U.S. infrastructure investment that is needed into 2025 is between $900 billion and $1.1 trillion. The figure includes common infrastructure, refining, rail and marine, gas and NGL processing and oil and gas gathering, pipelines and storage.

Capital is responding, however. Jason McMahon, a partner with private equity investment firm EnCap Investments LP, noted during the conference that the firm—which had traditionally invested in only upstream E&P—just raised its third midstream investment fund for its EnCap Flatrock Midstream LP partnership with Flatrock Energy Advisors. The newest fund is $3 billion. The second, raised in 2012, was $1.75 billion. The first, raised in 2010, was $792 million.

“We think about it in terms of for every dollar spent on the upstream side, there is a corresponding metric per dollar that needs to be spent on the midstream side in terms of bringing hydrocarbons to market,” McMahon added. The firm estimates the figure is some 25 cents to 35 cents per upstream dollar.

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