The midstream space is becoming increasingly lucrative as merger and acquisition values within the sector outshine upstream and downstream deals. Midstream transactions accounted for 55% of the total deal values in the oil and gas industry during second-quarter 2012, according to a new report.

While the upstream sector has dominated the world of mergers and acquisitions in recent years, the midstream universe appears poised to take over, suggests the PwC U.S. report. It shows oil and gas industry transactions greater than $50 million totaled $28.5 billion during a three-month period ending June 30, compared to $23.1 billion during the same period in 2011. That figure includes 14 midstream deals totaling $15.8 billion. In second quarter 2011, there were 14 midstream deals totaling $5.5 billion.

Of all the deals greater than $50 million completed during second-quarter 2012, 16 related to shale plays. Those deals totaled $7.5 billion and included two Marcellus Shale transactions worth $1.6 billion and one Utica Shale deal worth $194 million.

"Deal activity in both the Marcellus shale and Utica shale continued to tail off as a result of the persistent low price of natural gas," Steve Haffner, a Pittsburgh-based partner with PwC's energy practice, said in a public statement. "Over the past few quarters, shale assets were supported by strong pricing of natural gas liquids, but in the second quarter the market saw a drop in NGL (natural gas liquid) pricing, impacting deal activity even further. Now the focus is on the midstream sector."

Midstream deals are expected to hold steady in third-quarter 2012, with about $4 billion in acquisitions announced in August-September alone.

The largest midstream transaction of the month was Tallgrass Energy LP's purchase of some Kinder Morgan Energy Partners LP assets for $1.8 billion. Tallgrass acquired Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Co., the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming. As well, it bought Kinder Morgan's 50% interest in the Rockies Express Pipeline.

Kinder Morgan was obliged to shed the assets in order to obtain regulatory approval of its earlier El Paso Corp. acquisition.