US Natural Gas Boom Set to Fuel Midstream Energy Growth

HANetf's Harry Halewood sees midstream energy infrastructure benefiting from growing US natural gas production and rising LNG exports. The sector is poised to take advantage of countries seeking geographically diversified energy sources, particularly in light of disruptions in the Middle East. Halewood pointed to the recent completion of the Golden Pass LNG terminal on the Gulf Coast as a key development.

The outlook for US natural gas production looks positive, with export capacity expected to more than double between 2024 and 2029. Improved extraction efficiency and consolidation in the Permian Basin are also driving output. Additionally, artificial intelligence could provide another source of demand, with Bloomberg estimates suggesting US data centres could consume more natural gas than most countries by around 2035.

Midstream energy companies operate pipelines, transportation, processing, and liquefaction infrastructure through fee-based contracts, meaning their revenues are more closely tied to processing volumes than commodity prices. Halewood emphasized the correlation between returns on midstream energy funds and US natural gas production volume, stating 'there's very high correlation between returns on midstream energy funds... and the volume of gas production in the US much more closely than, in fact, with gas prices.'