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Pipeline sector to spend over $100B on new infrastructure in 2019, industry says

Spending on North American oil and gas transportation infrastructure will exceed $100 billion in 2019 amid efforts to alleviate pipeline bottlenecks in the Permian Basin, according to a new industry study by ICF International released June 18.

The study commissioned by the Interstate Natural Gas Association of America, or INGAA, examined midstream capacity needs through 2035 and concluded that $791 billion in CapEx for new projects is required, with $280 billion specifically prescribed for natural gas infrastructure.

Oil and gas industry investment will peak in 2019 before leveling off during the 2020s. That growth coincides with a persistent drilling boom in West Texas that has pipeline companies scrambling to find oil and gas takeaway solutions, as capacity shortfalls are expected to last well into 2019 for oil and potentially into the early 2020s for gas.

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While spending will slow down after 2019, according to ICF International Vice President Kevin Petak, this does not mean that the pipeline industry will be any less robust. North American gas consumption is expected to grow from 91 Bcf/d in 2017 to 130 Bcf/d by 2035.

"I don't think it is necessarily an indicator that the industry is going to shrink in size … but that new infrastructure development will slow down to some extent as the market matures and then replacement and refurbishment will grow as a result," he said during a June 18 press conference held by INGAA.

Between 2018 and the end of 2035, Petak said, the U.S. and Canada will still need to construct additional natural gas takeaway capacity totaling 57 Bcf/d.

INGAA President and CEO Don Santa, meanwhile, acknowledged that the study's CapEx estimates did not take into account President Donald Trump's recent decisions to remove tariff exemptions on products like steel from Mexico, Canada and the European Union and to impose quotas on foreign steel imports.

"I think there is the potential that steel tariffs … could have a negative impact on the industry and the ability to expand," he said during the press conference. "If nothing else, it has introduced a significant element of uncertainty."

Pipeline company executives like Plains All American Pipeline LP CEO Greg Armstrong have not hesitated to vocalize their frustration with the new federal policies.

"If they impose a limitation on the steel order that we had, and only 80% of it is able to be brought into the U.S., if you think about it, 80% of a pipeline really doesn't do us any good," he explained June 6. "It's kind of like only 80% of a bridge. It's kind of pretty to look at, but you can't get across it."

INGAA's Santa also urged the industry to take a backseat on the debate over whether the Transportation Security Administration should transfer U.S. pipeline security oversight to the U.S. Department of Energy so that the Federal Energy Regulatory Commission can create mandatory cybersecurity standards for domestic pipeline systems. Instead of focusing on where that authority should lie, he said, the midstream sector should "focus on ... things that could be improved with TSA's exercise of its jurisdiction."