As we’ve noted countless times before, the fracking revolution has completely changed the game for America’s energy sector. Energy companies continue to use the technique along with other advanced horizontal drilling methods to unearth a huge abundance of oil and natural gas.
In fact, the U.S. has quickly overtaken Russia as the number one producer of natural gas and could possibly pass Saudi Arabia in terms of oil production in the near future.
That surge has made many energy firms the stocks to buy as this production growth has taken hold. It also creates an interesting and potentially expensive problem: the need for more infrastructure.
In order to move and process all of this immense bounty, we are going to need plenty of new pipelines, fractionators and other pieces of energy logistics. Building all of this vital infrastructure is going to cost a pretty penny and take years to complete.
That means some of the best stocks to buy could be the firms doing that heavy lifting and construction.
More Than Half A Trillion Dollars
North America’s energy landscape is currently a crisscrossed map of distribution bottlenecks, broken connections and pricing discrepancies. Eliminating those issues is key to even begin thinking about using our newfound bounty.
At the same time, the bulk of America’s new sources of plentiful supply are coming from areas that have not historically been known for energy production. Areas such Michigan’s Antrim shale and Ohio’s Utica are becoming hotbeds of production. To take advantage of and gather these unconventional resources, new pipelines and infrastructure must be built.
Adding in new liquefied natural gas (LNG) export terminals and various processing plants so that we can actually use what we produce bumps the amount of needed infrastructure up even further. And building all of this won’t be a cheap undertaking. No, it’s actually going to be very expensive indeed.
According to an updated study by consultancy group ICF International, America will need to spend roughly $30 billion per year on new midstream infrastructure through 2035. That’s about 3 times the amount that ICF predicted at the start of the shale boom and equates to a monster $641 billion in total spending on pipelines, pumps and gather facilities.
Let that number sink in for second — $641 billion.
The key is attaching all of the new and upcoming shale fields into our current pipeline network. For example, despite being one of the most prolific producing regions in the country, producers in North Dakota’s Bakken continue to ship their product via more expensive rail cars rather than pipelines.
At the same time, the majority of natural gas in the region is flared off during production as there is no ways to get that product to market. ICF predicts that nearly 35,000 miles of new transmission pipelines will be need to be built as well as 303,000 miles worth of gas gathering lines in order to connect fields like the Bakken and Marcellus to trunk lines.
Overall, ICF estimates that this amount of spending will be critical to helping North America’s energy boom move forward. Without it, the movement’s potential will be constrained.
That’s why the stocks to buy could be the construction and engineering firms that focus on building energy infrastructure. Here are three of the best stocks to buy for America’s upcoming infrastructure boom: