A rapid run-up in unconventional crude production and existing infrastructure that is highly underdeveloped is creating countless opportunities for energy infrastructure firms to probe North America’s transportation grid.

“You have a lot of unconventional resource coming on in a hurry in places where 30 June 2013 MidstreamBusiness.com In The Pipeline the infrastructure isn’t fully developed,” according to Duane Rae, president of Spectra Energy Liquids. “There are tens of billions of dollars in investment opportunities for energy infrastructure companies in the crude oil business in North America.”

Speaking at a recent Hart Energy breakfast in Houston, Rae, and Greg Haas, Hart Energy’s director of integrated oil and gas research, highlighted numerous midstream-development opportunities that are emerging as oil production from U.S. shale plays continues to grow.

According to Haas, the North American crude market is experiencing a “super cycle of midstream investment," both in the pipeline and rail and perhaps later this year in some other sectors as well.

“We are truly facing a time of unfrequented change in the entire continent,” he added, noting that cost advantages for crude are playing out not only in the midstream sector but in the downstream and upstream sectors of Canada and the U.S.

Traditionally a natural gas infrastructure firm, Spectra first entered the oil infrastructure business in mid-March—acquiring the 1,717-mile Express-Platte pipeline system for $1.49 billion. The pipeline originates in Hardisty, Alberta, and ends in Wood River, Illinois.

The acquisition represented a good investment that would spur growth and stable cash flows, Rae said.

Not only would the acquisition allow the firm to “diversify,” but the pipeline purchase made sense since Spectra was “attached at one end to growing [crude oil] supply that will continue to grow for a long time and on the other end, attached to some pretty attractive markets with a pipe that is the lowest cost conduit between supply and market.”

Compared with other crude oil infrastructure, pipelines are typically cheaper, safer and more environmentally friendly, according to Rae. On the other hand, modern regulatory requirements can make the pipeline construction process slow and extremely expensive.

Not surprisingly, that has led to a ramp-up in crude-by-rail deliveries, Rae told attendees.

Currently, at least 700,000 bbl. per day of crude oil—mostly from the Bakken formation underlying parts of Montana, North Dakota and Saskatchewan—are moved by rail, and it’s “dramatically changing the way oil flows,” Rae said.

And since rail allows for optionality of direction, Rae said it addresses the problem of pipelines not delivering oil to its final destination.

“Rail is not so much a competitor to pipelines, but an enabler,” he added. “A rail can get the oil that last little way to the refiners … that don’t have ready pipeline access on the East Coast or West Coast or not enough pipeline capacity as we’re seeing in the Gulf coast.”

Although rail-loading capacity is sufficient and rail-unloading capacity at Gulf Coast refineries is improving, not enough rail cars are available to transport the crude oil, according to Haas.

At least in the short term, rail terminals will need to be established along much of the Express-Platte pipeline system, Rae said.

“What we’re seeing is growing production from the oil sands in Alberta, the Bakken, Niobrara and the Rockies feeding our pipe,” he said. “That oil needs to get to market, and we have the lowest-cost route to certain markets.

“We see that pipeline infrastructure is not really configured to the current supply demand [of crude oil],” Rae added. “Rail has become a critical link—increasingly more so in the next few years.”

And while growing unconventional supply in North America will likely continue to displace offshore crude imports to a large extent, the U.S. will probably remain dependent on heavy crude imports for the foreseeable future.

Conversely, both speakers suggested that the U.S. will likely become less reliant— though not completely independent of— light, sweet crude imports.

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