In this episode of Navigating the Currents of Change, IIR’s Vice President of Energy Products Shane Mullins joins host Shaheen Chohan to unpack the trends, uncertainties, and $40 billion in forecasted investment activity reshaping the U.S. midstream market in 2025.
[Intro] (00:00):
Under the second term of the Trump administration, the near-term drivers for midstream gas markets have probably never been more positive. And so the big questions are: is the US entering into a new accelerated period of growth in gas-related capital spending, certainly driven off the combination of both strong US domestic demand and certainly very strong appetite for US gas exports? Or are there any potential impediments that could derail this?
Shaheen Chohan (00:48):
Welcome to Navigating the Currents of Change. I'm Shaheen Chohan and I lead Global Analytics here at Industrial Info Resources, a company recognized for over 40 years in delivering trusted industrial data, verified and constantly updated across more than 12 industries worldwide. Now, to help me answer these questions and some others, I'm delighted to be joined by Shane Mullins, Senior Vice President of Energy Products here at IIR. And Shane manages the development of our energy-related research and our analytics products and solutions. Welcome, Shane.
But before we embark on our discussion, I would like to say a very big thank you to today's podcast sponsor, HILCO. HILCO is the world leader in motion control and filtration systems since 1905. HILCO filtration systems have been the industry standard. HILCO brings fluid contamination problems under control cost-effectively with a full range of engineered filters, cartridges, reclaimer coolant recyclers and fluid conditioning systems.
So, Shane, can you give us an update on what is driving traditional midstream CapEx in what is the world's largest market, that being the US?
Shane Mullins (02:13):
Yeah. I mean, we are in a lower-for-longer oil price environment — at least that's the way the forecasts are laying it out for us over the next couple of years. But despite that, there is strong demand for LNG internationally. We're seeing strong domestic natural gas demand, and we're seeing the barrel of oil getting gassier here in the oil plays. And all of this is leading to stronger natural gas and natural gas liquids production. And we need to find a home for it, and that's what's driving a lot of the midstream spend that we see going forward.
Shaheen Chohan (02:47):
Now, Shane, from a supply perspective, where are you expecting to see the additional capital spending being deployed? Where is it going to be located?
Shane Mullins (02:52):
Well, to date, most of the supply has been coming from the Permian Basin, and it's going to continue to come from that region. But we've got over 16 BCF worth of natural gas demand coming our way, and there's about a seven BCF forecasted growth out of the Permian Basin. So it has to come from somewhere else as well. That's why we feel that over the next year, we're going to have the right pricing to enable the Haynesville production region in northern Louisiana to come back to life. We're also going to see some in-basin demand increase in the Appalachia that's going to enable increased production there, especially coming from data center demand.
Shaheen Chohan (03:34):
Now, looking at the shift or the pivot by the administration — we're certainly seeing a much bigger focus on offshore developments. Will gas markets benefit from this additional support from the administration?
Shane Mullins (03:46):
I think the key thing is permitting reform and reduced environmental regulations. These are both going to help midstream spend, especially on the pipeline side. We're hoping that we don't have to go all the way to the Supreme Court to get approval to build another large takeaway pipeline out of the northeast in this administration. So that will be a very positive driver for us.
Shaheen Chohan (04:09):
Now, the current administration is also actually pulling out of the Paris Accord and certainly reducing EPA regulations and the power of the EPA. Do you see this as having something of a negative impact on the ability for US exports to be attractive in international markets?
Shane Mullins (04:33):
Yeah. Well, the European Union is our largest market — it's where 70% of our LNG goes to right now. And that's going to increase as Europe looks at completely weaning off the Russian gas supply market by 2027. And at the same time, they're still on a decarbonization path, and they're not going to be interested in our hydrocarbon products if we're not as well. And that's not lost on the US producer. So we've made incredible progress to date on methane emissions reductions, and that's going to continue — especially when it comes to any producer that's looking at export markets right now. So there's an increased focus on getting third-party certification for low emissions-intensity fuels being exported out of the US.
Shaheen Chohan (05:16):
But Shane, would that also be the case — I mean, we've recently seen the Department of Energy cancel, I think, 24 grants for carbon capture, certainly in the heavy industry space. How does that in reality impact the carbon capture outlook for gas markets?
Shane Mullins (05:35):
Well, 70% of those grants that were rejected recently may still go to court. I do realize most of those were granted between the election and January — they were hastily granted. And there is kind of a fear that not enough review took place in the granting of those, so we could see some of those come back upon further review. The last thing the Trump administration wants to see is another Solyndra, where they issue a lot of taxpayer dollars to a project that helps it get built, but then it's never actually utilized. And so they're looking at weeding out some of those projects.
In the meantime, we have a lot of power plants that are going to be hydrogen-ready. There's a big market for hydrogen that's not going to be enabled by green hydrogen — we still see blue hydrogen moving forward, blue ammonia. And those projects are going to require carbon capture and sequestration to occur, mostly along the Gulf Coast. We see those projects happening. But in addition to that, anywhere where you see concentrations of CO2 at very high rates — gas processing, ethanol production facilities, microgrids where they're putting in hydrogen fuel cells — those are all going to be opportunities for carbon capture and sequestration to move forward.
Shaheen Chohan (06:49):
Shifting gears a little bit and really honing down on the demand side. We're obviously seeing a surge in domestic electricity demand in the US. Traditionally we've seen that sort of year-on-year about 1% growth, but we're now seeing electricity demand trending upwards. And that's probably coming from growth in new-build capacity around some of what we call the trending sectors — most notably the billions of dollars that is now flowing into the data center market. The capital projects building out new capacities — both the data center capacity under construction — but also we're seeing a wave of new project announcements. I assume that gas-fired capacity will have to be the go-to power source to meet this demand growth. Would that be correct?
Shane Mullins (07:45):
Yeah. In an ideal world, if all the data centers were being spread out evenly across the United States, that 2% growth could be handled by renewable energy. But unfortunately, the concentrations of data centers going in — into Atlanta, and the Dallas-Fort Worth region, and West Texas and San Antonio, and really concentrated areas — because of that, there's not going to be the transmission capacity available for years. So you're seeing microgrid projects, behind-the-meter projects being developed to provide power directly to the data center, bypassing the grid. And that's going to require, for several years from now, natural gas technologies.
Shaheen Chohan (08:25):
Okay. Now I want to sort of move slightly down the gas supply chain and capture your thoughts around gas processing. Does the US have sufficient capacity in place today, and are you actually seeing higher levels of future processing capacity being developed and deployed?
Shane Mullins (08:42):
We are seeing a need for at least 24 more gas processing trains added over the next 24 months. These trains average from 200 to 275 million cubic feet a day in size, and each train of that size is going to be producing 30,000 barrels per day of natural gas liquids. And that means our natural gas liquids outlook is increasing by at least a million barrels per day over the next 24 months. And for that reason, we have very little additional supply of fractionation capacity, and we're seeing some additional fractionation trains start to move forward. And when you fractionate natural gas liquids, you end up with propane and butane and ethane and LPG products that won't find a home in the US — they have to find a home abroad. And so we're seeing additional export infrastructure being developed on that front as well.
Shaheen Chohan (09:34):
All right. Well, staying with that export theme — obviously a very valuable component for any project developer not only looking to feed domestic demand, but these export markets are super important. The US is clearly already the largest LNG producer and now one of the largest exporters in the world. How many additional FIDs do you see moving forward over the near term to make sure that LNG liquefaction and production continues to move forward at pace?
Shane Mullins (10:07):
It never ceases to amaze me. We have eight facilities operational or under construction now — there's ten in Australia. And so the very idea that we could be in a position for more FIDs is pretty impressive. At this point, there are six projects that are seeking an FID between now and the end of the year. Two of them are looking very, very promising beyond the Woodside and the Cedar LNG project up in Canada. Commonwealth LNG has received all the contractual agreements that they need to move forward, to reach out to the financing community to finish that project, and it's fully bankable. And then behind that, you're going to have CP2, the Cheniere Train 7 and 9, but not far behind. That would be another Cheniere project — a Sabine Pass expansion and also the Lake Charles project. So there's plenty of project opportunities facing us over the next 24 months as far as additional FIDs, which is kind of an amazing place to be.
Shaheen Chohan (11:07):
Well, I mean, it's one thing for a project to move through and into that very important milestone, but are we seeing CapEx realization? What kind of level of total CapEx spend do you expect to see moving forward actually into construction, certainly over the next 12 to 24 months?
Shane Mullins (11:32):
If our forecast holds true and we do see four additional FIDs for LNG between now and the end of 2026, we could see $40 billion worth of midstream spend, including LNG, both this year and next year — which is quite an improvement over the all-of-government approach against oil and gas that we saw over the previous few years.
Shaheen Chohan (11:48):
That brings us to the conclusion of our podcast. Shane, as always, fascinating insights — thanks very much for sharing those with us today. Folks, if any of you have any further questions about some of the points that were raised today, then please do reach out to myself or to Shane via our contact details that you can see here. And of course, I do want to say another very big thank you to our sponsors today, HILCO — the world leader in motion control and filtration systems. And also a big thank you to you folks for joining us. I really do hope that we have helped you all better navigate some of the currents of change that we're clearly seeing.
Under the second term of the Trump administration, the near-term drivers for midstream gas markets have probably never been more positive. And so the big questions are: is the US entering into a new accelerated period of growth in gas-related capital spending, certainly driven off the combination of both strong US domestic demand and certainly very strong appetite for US gas exports? Or are there any potential impediments that could derail this?
Shaheen Chohan (00:48):
Welcome to Navigating the Currents of Change. I'm Shaheen Chohan and I lead Global Analytics here at Industrial Info Resources, a company recognized for over 40 years in delivering trusted industrial data, verified and constantly updated across more than 12 industries worldwide. Now, to help me answer these questions and some others, I'm delighted to be joined by Shane Mullins, Senior Vice President of Energy Products here at IIR. And Shane manages the development of our energy-related research and our analytics products and solutions. Welcome, Shane.
But before we embark on our discussion, I would like to say a very big thank you to today's podcast sponsor, HILCO. HILCO is the world leader in motion control and filtration systems since 1905. HILCO filtration systems have been the industry standard. HILCO brings fluid contamination problems under control cost-effectively with a full range of engineered filters, cartridges, reclaimer coolant recyclers and fluid conditioning systems.
So, Shane, can you give us an update on what is driving traditional midstream CapEx in what is the world's largest market, that being the US?
Shane Mullins (02:13):
Yeah. I mean, we are in a lower-for-longer oil price environment — at least that's the way the forecasts are laying it out for us over the next couple of years. But despite that, there is strong demand for LNG internationally. We're seeing strong domestic natural gas demand, and we're seeing the barrel of oil getting gassier here in the oil plays. And all of this is leading to stronger natural gas and natural gas liquids production. And we need to find a home for it, and that's what's driving a lot of the midstream spend that we see going forward.
Shaheen Chohan (02:47):
Now, Shane, from a supply perspective, where are you expecting to see the additional capital spending being deployed? Where is it going to be located?
Shane Mullins (02:52):
Well, to date, most of the supply has been coming from the Permian Basin, and it's going to continue to come from that region. But we've got over 16 BCF worth of natural gas demand coming our way, and there's about a seven BCF forecasted growth out of the Permian Basin. So it has to come from somewhere else as well. That's why we feel that over the next year, we're going to have the right pricing to enable the Haynesville production region in northern Louisiana to come back to life. We're also going to see some in-basin demand increase in the Appalachia that's going to enable increased production there, especially coming from data center demand.
Shaheen Chohan (03:34):
Now, looking at the shift or the pivot by the administration — we're certainly seeing a much bigger focus on offshore developments. Will gas markets benefit from this additional support from the administration?
Shane Mullins (03:46):
I think the key thing is permitting reform and reduced environmental regulations. These are both going to help midstream spend, especially on the pipeline side. We're hoping that we don't have to go all the way to the Supreme Court to get approval to build another large takeaway pipeline out of the northeast in this administration. So that will be a very positive driver for us.
Shaheen Chohan (04:09):
Now, the current administration is also actually pulling out of the Paris Accord and certainly reducing EPA regulations and the power of the EPA. Do you see this as having something of a negative impact on the ability for US exports to be attractive in international markets?
Shane Mullins (04:33):
Yeah. Well, the European Union is our largest market — it's where 70% of our LNG goes to right now. And that's going to increase as Europe looks at completely weaning off the Russian gas supply market by 2027. And at the same time, they're still on a decarbonization path, and they're not going to be interested in our hydrocarbon products if we're not as well. And that's not lost on the US producer. So we've made incredible progress to date on methane emissions reductions, and that's going to continue — especially when it comes to any producer that's looking at export markets right now. So there's an increased focus on getting third-party certification for low emissions-intensity fuels being exported out of the US.
Shaheen Chohan (05:16):
But Shane, would that also be the case — I mean, we've recently seen the Department of Energy cancel, I think, 24 grants for carbon capture, certainly in the heavy industry space. How does that in reality impact the carbon capture outlook for gas markets?
Shane Mullins (05:35):
Well, 70% of those grants that were rejected recently may still go to court. I do realize most of those were granted between the election and January — they were hastily granted. And there is kind of a fear that not enough review took place in the granting of those, so we could see some of those come back upon further review. The last thing the Trump administration wants to see is another Solyndra, where they issue a lot of taxpayer dollars to a project that helps it get built, but then it's never actually utilized. And so they're looking at weeding out some of those projects.
In the meantime, we have a lot of power plants that are going to be hydrogen-ready. There's a big market for hydrogen that's not going to be enabled by green hydrogen — we still see blue hydrogen moving forward, blue ammonia. And those projects are going to require carbon capture and sequestration to occur, mostly along the Gulf Coast. We see those projects happening. But in addition to that, anywhere where you see concentrations of CO2 at very high rates — gas processing, ethanol production facilities, microgrids where they're putting in hydrogen fuel cells — those are all going to be opportunities for carbon capture and sequestration to move forward.
Shaheen Chohan (06:49):
Shifting gears a little bit and really honing down on the demand side. We're obviously seeing a surge in domestic electricity demand in the US. Traditionally we've seen that sort of year-on-year about 1% growth, but we're now seeing electricity demand trending upwards. And that's probably coming from growth in new-build capacity around some of what we call the trending sectors — most notably the billions of dollars that is now flowing into the data center market. The capital projects building out new capacities — both the data center capacity under construction — but also we're seeing a wave of new project announcements. I assume that gas-fired capacity will have to be the go-to power source to meet this demand growth. Would that be correct?
Shane Mullins (07:45):
Yeah. In an ideal world, if all the data centers were being spread out evenly across the United States, that 2% growth could be handled by renewable energy. But unfortunately, the concentrations of data centers going in — into Atlanta, and the Dallas-Fort Worth region, and West Texas and San Antonio, and really concentrated areas — because of that, there's not going to be the transmission capacity available for years. So you're seeing microgrid projects, behind-the-meter projects being developed to provide power directly to the data center, bypassing the grid. And that's going to require, for several years from now, natural gas technologies.
Shaheen Chohan (08:25):
Okay. Now I want to sort of move slightly down the gas supply chain and capture your thoughts around gas processing. Does the US have sufficient capacity in place today, and are you actually seeing higher levels of future processing capacity being developed and deployed?
Shane Mullins (08:42):
We are seeing a need for at least 24 more gas processing trains added over the next 24 months. These trains average from 200 to 275 million cubic feet a day in size, and each train of that size is going to be producing 30,000 barrels per day of natural gas liquids. And that means our natural gas liquids outlook is increasing by at least a million barrels per day over the next 24 months. And for that reason, we have very little additional supply of fractionation capacity, and we're seeing some additional fractionation trains start to move forward. And when you fractionate natural gas liquids, you end up with propane and butane and ethane and LPG products that won't find a home in the US — they have to find a home abroad. And so we're seeing additional export infrastructure being developed on that front as well.
Shaheen Chohan (09:34):
All right. Well, staying with that export theme — obviously a very valuable component for any project developer not only looking to feed domestic demand, but these export markets are super important. The US is clearly already the largest LNG producer and now one of the largest exporters in the world. How many additional FIDs do you see moving forward over the near term to make sure that LNG liquefaction and production continues to move forward at pace?
Shane Mullins (10:07):
It never ceases to amaze me. We have eight facilities operational or under construction now — there's ten in Australia. And so the very idea that we could be in a position for more FIDs is pretty impressive. At this point, there are six projects that are seeking an FID between now and the end of the year. Two of them are looking very, very promising beyond the Woodside and the Cedar LNG project up in Canada. Commonwealth LNG has received all the contractual agreements that they need to move forward, to reach out to the financing community to finish that project, and it's fully bankable. And then behind that, you're going to have CP2, the Cheniere Train 7 and 9, but not far behind. That would be another Cheniere project — a Sabine Pass expansion and also the Lake Charles project. So there's plenty of project opportunities facing us over the next 24 months as far as additional FIDs, which is kind of an amazing place to be.
Shaheen Chohan (11:07):
Well, I mean, it's one thing for a project to move through and into that very important milestone, but are we seeing CapEx realization? What kind of level of total CapEx spend do you expect to see moving forward actually into construction, certainly over the next 12 to 24 months?
Shane Mullins (11:32):
If our forecast holds true and we do see four additional FIDs for LNG between now and the end of 2026, we could see $40 billion worth of midstream spend, including LNG, both this year and next year — which is quite an improvement over the all-of-government approach against oil and gas that we saw over the previous few years.
Shaheen Chohan (11:48):
That brings us to the conclusion of our podcast. Shane, as always, fascinating insights — thanks very much for sharing those with us today. Folks, if any of you have any further questions about some of the points that were raised today, then please do reach out to myself or to Shane via our contact details that you can see here. And of course, I do want to say another very big thank you to our sponsors today, HILCO — the world leader in motion control and filtration systems. And also a big thank you to you folks for joining us. I really do hope that we have helped you all better navigate some of the currents of change that we're clearly seeing.
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*This episode is brought to you by Industrial Info's Latin American Office in Argentina.