“You can observe a lot by just watching.”

—Yogi Berra

From my office in the Dallas-Fort Worth area, I can see the Union Pacific Railroad track that runs to and from Odessa, Pecos and Midland, Texas. A vast number of westbound hopper cars, I assume filled with sand, make up a growing share of the many freight trains that rumble past daily.

Sand? That’s an educated guess, of course, since I can’t see inside them. They may be filled with corn, soybeans, polyethylene pellets or Nerf balls. So it’s just a hunch on my part.

But what I don’t have to guess at is the impressive number of flatcars laden with big-inch pipe—all headed west. I’ve seen entire trains, maybe 50 cars, with what must be 30- or 36-inch pipe, rumbling by.

That’s a lot of steel.

Separately, a recent trip across Central Texas found the otherwise empty farm road I drove suddenly crossed by a busy pipeline-construction crew, working a recently cleared right of way, with a dozen or two trucks and cars parked on the shoulders—well off the pavement to keep the safety manager happy.

I passed several trucks pulling what appeared to be gas-processing-plant modules on a recent trip along Interstate 20. My landman son-in-law has stories of having to sleep in his pickup on trips west from his Fort Worth home. These tales are funny around the dinner table; not so much when every motel has its “No Vacancy” light on.

And recent trips to Oklahoma and North Dakota found similar action to serve Midcontinent and Bakken producers.

Hmm, from what I observe, somewhere there’s a lot going on.

All those U.S. Energy Information Administration reports with production charts, traversed by an X axis steadily headed northeast, are another clue. Crude oil, natural gas and NGL volumes continue to surge.

It’s a nice problem to have, but the midstream must hustle to catch up with it all—thus that pipe and related anecdotes. The buildup contributed greatly to the excellent programs and lively conversations at the recent Hart Energy DUG Permian conference in Fort Worth and GPA Midstream convention in San Antonio.

This issue features the Midstream 50, our annual benchmark on the sector’s biggest publicly held players. And the numbers look positive. But I wish they looked better and I wish Wall Street would take notice. Never mind, say many investors, who seem unimpressed with traditional energy investments of any kind nowadays. And that makes the buildout particularly tough to pull off.

Where will the money come from?

We feature in this issue several observations on how the sector will pay for all the new infrastructure that must go in place to serve the industry. It will get done; it has to.

However the sector pays for it, it will be a massive undertaking. All that pipe ain’t cheap and plenty more will be needed by the energy industry in the next few years. The Permian, after all, is a massive operation nowadays and, by some estimates, the largest oil field, in the world.

U.S. Energy Information Administration numbers place Permian crude production at around 4 million barrels per day. That’s astounding, given that just 10 years ago the number was one-fourth as much.

And did I mention natural gas and NGL too? The numbers are extravagant. Elsewhere in the nation, we have become a significant producer of petroleum products and a growing presence in LNG. That requires substantial midstream investment new tankage, new docks, new liquefaction plants—and much more.

It’s challenging, but certainly a nice problem to have.

Fulfilling the needs of producers will take a lot of work and we should be glad private enterprise—not a bureaucrat in a Washington cubicle—will decide how and where to do it all. Governments has a bad record of investing where the economic action was—not where it will be.

By my observation, private enterprise consistently does a better job of development in any sector and should get thanks for pushing the U.S. to the forefront of the world’s oil and gas business.

Something’s happening. And that’s a good thing.

Paul Hart can be reached at pdhart@hartenergy.com or 713-260-6427.

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