The U.S. onshore drilling boom has unleashed a tidal wave of natural gas. From 2005 through 2014, U.S. dry natural gas production surged more than 40 percent, according to the Energy Information Administration. It’s a big reason the commodity is so cheap—futures are priced at under $3 per million British thermal units, and the number of U.S. gas rigs has fallen by a third since last year, according to Baker Hughes.
But one part of the U.S. gas market is thriving: infrastructure. Several companies are plowing billions into new projects, making long-term bets that demand for nat gas will grow and, along with it, the need for infrastructure to transport, store and process it.
“This is more of a response to the oversupplied market,” said John Hilfiker, an analyst at Bentek Energy, the market analytics unit of Platts. “The past two to three years, you’ve been in a situation where producers couldn’t grow production because there wasn’t enough pipeline to handle it.”
Bentek Energy estimates that roughly $54 billion has been invested in new natural gas pipeline capacity in the United States since 2009. Nearly double that—another $104 billion—is planned between 2016 and 2018.
Unlike crude oil, which can be moved by pipeline, train, barge or tanker, the transportation of natural gas is extremely limited. Gas can be compressed or liquefied and then carted by truck, but pipeline is the only way to move significant quantities.
Analysts say a lack of domestic infrastructure—pipelines can take years to get approved and built—has actually weighed on production growth. And even if gas production falls further amid prolonged low prices, a transportation shortage still exists. That’s the reason some producers, most notably in North Dakota’s Bakken formation, have been “flaring” gas—the practice of burning off excess that can’t find a place in pipelines.