Midstream activities are the critical link in the energy value chain, connecting upstream production to downstream end markets. Midstream activities include the gathering, processing/blending, transportation and storage of oil, natural gas and related products. These activities also include liquefied natural gas (“LNG”) liquefaction, transport, and “re-gas” facilities which will require several hundred billion dollars of capital to meet future demand. Transportation infrastructure varies widely by market and may include land-based pipelines, Floating Production Storage and Offloading Vessels (“FPSO’s”), or LNG tankers. As upstream development shifts to new basins, significant midstream infrastructure is required across the world to deliver hydrocarbons to the premium demand markets. As a consequence, the amount of capital spend devoted to midstream relative to upstream spending has increased by over 50% from a decade ago and is expected to continue growing in the years ahead.
EIG is strategically positioned to capitalize on the global midstream development opportunity. A team of dedicated midstream professionals works closely with EIG colleagues across the upstream and power sectors to source and evaluate new midstream opportunities. For example, when evaluating a potential midstream investment, EIG petroleum engineers contribute to evaluating the production profiles underlying new infrastructure in new areas while EIG experts in the power sector help assess off-take demand.
The following examples demonstrate EIG's experience and current areas of focus in the midstream sector.
In August 2014, EIG contributed the equity interest of an Eagle Ford midstream company into another midstream provider in the basin, forming a premier Eagle Ford focused midstream company. The combined entity is recognized as one of the top-5 processors in the Eagle Ford by capacity, has a gathering system that stretches the width of the play and operates an integrated platform from wellhead to both NGL and natural gas end users.
In June 2009, EIG formed a new entity to acquire the West Texas gathering assets of a publicly traded exploration and production company. EIG had followed the acquired gathering assets and associated reserves for over a decade, and also had a 15 year relationship with the seller. EIG approached the seller and ultimately struck a deal whereby EIG acquired the assets and the seller obtained liquidity for its core upstream business. The gathering assets are leased back to the seller under long-term ship-or-pay contracts that entitle EIG to a primarily fixed tariff for capacity on the system.
In October 2013, EIG became the controlling shareholder in the Port of Aҫu which has been under development since 2007. The opportunity arose when liquidity constraints at the company’s parent hampered its ability to fund the equity required to complete construction. The port is strategically located approximately 300 km north of Rio de Janeiro between the Campos and Santos offshore oil basins and the Minas Gerais iron ore producing region. EIG believes that Aҫu will be among the world’s largest port complexes and will play a critical role in the development of Brazil’s oil & gas and iron ore industries.
In July 2012, EIG invested in a pipeline that transports natural gas from Bolivia to Brazil. EIG believes that the pipeline, which spans over 3,100 kilometers and has operated since 1999, is one of the premier energy infrastructure assets in South America. Capacity in the pipeline is fully contracted to a large integrated energy company in Brazil and over 35% of Brazil’s natural gas consumption in 2011 was imported through the pipeline. EIG purchased common equity and shareholder loans and sits on the Board of both the Bolivian and Brazilian entities.