Market signals are suggesting that we’re on the cusp of another midstream revival. Higher crude oil and natural gas prices are prompting producers to ramp up output, and higher production will lead to increasing midstream constraints and cratering supply prices. We’ve seen this reel before and in past cycles, midstreamers would swoop in right about now with plans for a host of pipeline expansions to relieve bottlenecks and balance the market again. The problem is that for capacity to get built, you need producers to sign up with long-term commitments, and that’s the catch. Wall Street has drawn a hard line when it comes to capital and environmental discipline in the energy industry, and regulatory support for hydrocarbon newbuilds has waned. This is especially a problem for two major basins — the Permian and Marcellus/Utica — but is liable to affect producer behavior across the Lower 48. In today’s RBN blog, we take a closer look at how this will play out at the basin level, starting with the Permian.
In Part 1 of this series, we discussed the relationship between midstream infrastructure and production growth as a key driver of the Shale Revolution. The bottom line was that without the rapid buildout of pipeline and other midstream infrastructure over the past decade or so, Lower 48 gas production volumes would be nowhere near where they are today.
We also considered the challenges in today’s environment for getting midstream expansions across the finish line. U.S. natural gas supply is primed for growth, with the Lower 48 supply-demand balance the most bullish it has been in years. On top of that, exports are very strong and poised for growth, with international prices setting records. Henry Hub gas futures are also near their highest level in over a decade. It would seem that if elevated prices incentivize incremental production and constraints create regional imbalances, infrastructure expansions would again play a critical role in debottlenecking and balancing markets and facilitating production growth. However, the focus on energy transition and capital discipline — and the overall bias against hydrocarbons — have changed the game, making it harder to get the long-term capacity commitments and financial and regulatory support to get midstream projects done. Producers, who were always reluctant to commit to new capacity, are now even more wary of backing these projects for fear of getting slapped down by Wall Street.
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About the song
“Up Around the Bend” was written by John Fogerty and appears as the first song on side two of Creedence Clearwater Revival’s fifth studio album, Cosmo’s Factory. Released in April 1970 as a double-sided single — with “Run Through the Jungle” on the other side — “Up Around the Bend” went to #4 on the Billboard Hot 100 Singles chart. It has been certified Gold by the Recording Industry Association of America (RIAA). Both songs on the single were written and recorded for inclusion on Cosmo’s Factory just days before the band left on its 1970 European tour. Personnel on the record were: John Fogerty (lead vocals, lead guitar, keyboards), Tom Fogerty (rhythm guitar, backing vocals), Stu Cook (bass, backing vocals), and Doug Clifford (drums).
Cosmo’s Factory was recorded in 1969-70 at Wally Heider in San Francisco. Produced by John Fogerty, the album was released in July 1970 and went to #1 on the Billboard 200 Albums chart. It has been certified 4x Platinum by the RIAA. Four singles were released from the LP.
Creedence Clearwater Revival, also known as Creedence and CCR, were an American rock band formed in El Cerrito, CA, by John and Tom Fogerty, Stu Cook, and Doug Clifford. They had played together as a band since 1959, first as The Blue Velvets, then The Golliwogs, before changing their name to Creedence Clearwater Revival in 1967. The group officially disbanded in 1972. After years of legal battles, John Fogerty started playing CCR songs again in his live sets beginning in 1987. CCR released seven studio albums, three live albums, 41 compilation albums, and 29 singles. The band was inducted into the Rock and Roll Hall of Fame in 1993. Tom Fogerty died in September 1990. Stu Cook and Doug Clifford tour as Creedence Clearwater Revisited, playing CCR hits. John Fogerty continues to record and begins a new four-month tour in June.
