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Southern U.S. to see nearly $500 billion in oil and gas infrastructure spending by 2025, report says
Energy companies are set to spend close to $1 trillion on oil and gas storage, processing and transportation upgrades over the next decade, investments that will support more than 900,000 jobs nationwide, according to a new report released by the American Petroleum Institute and IHS Global Insight. More than half of that spending is expected to go toward projects in the South.
The report, released at the API State of American Energy 2014 event held in Washington D.C. on Tuesday (Jan. 7), predicts companies on average will spend $73.8 billion annually from 2014 to 2025 to build new pipelines, storage and processing facilities, and rail cars and marine vessels needed to transport oil and natural gas across the country.
The spending boom is expected to coincide with a surge in domestic oil and gas production as hydraulic fracturing and horizontal drilling technology allow companies to tap new reservoirs across the country. So-called unconventional drilling helped the United States add nearly 1.2 million barrels per day of oil production capacity from 2008 to 2012.
Companies now need more and newer pipelines, storage areas, rail cars and barges in order to transport crude oil and gas as well as refined products.
The report comes as the API and other industry groups rev up a new campaign to promote their political program leading up to the 2014 mid-term elections. Key issues include approval of the Keystone Pipeline, less stringent hydraulic fracturing regulations, and increased crude oil and liquefied natural gas (LNG) exports.
"What we want and what the American people deserve is energy policy that continues the trend of our nation becoming energy self-sufficient and a global energy leader," API President and CEO Jack Gerard said during his State of American Energy address Tuesday morning.
The IHS report emphasizes that rapid growth in energy infrastructure spending is a small subset of overall spending on drilling operations and other energy segments expected in coming years.
According to the report, Southern states are set to benefit most from the infrastructure spending boom, with investments totaling $41.5 billion annually from 2014 to 2025 and more than 500,000 direct and indirect jobs.
Spending was broken down by U.S. Census Bureau region. The Southern region includes Louisiana, Maryland, West Virginia, Virginia, North Carolina, South Carolina, Georgia, Florida, Tennessee, Kentucky, Mississippi, Alabama, Arkansas, Oklahoma and Texas.
IHS predicts the majority of investments nationwide will go toward building new pipelines to transport refined products, crude oil, natural gas and natural gas liquids, such as ethane and propane.
The oil and gas processing and storage segment is also expected to draw significant investment.
IHS estimates that capital spending in transportation and storage infrastructure has grown by 60 percent since 2010. Spending is expected to reach $89.6 billion total in 2013.