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Building Out The LNG Infrastructure: A Diverse And Profitable Enterprise

Stocks in this article: E

CALGARY, Alberta, Feb. 27, 2014 (GLOBE NEWSWIRE) -- If you build it, they will explore. Then drill. Then transport by pipeline. But first, you have to build it.

The 'it' is the infrastructure necessary to support the anticipated $55 billion spend in Northern BC to facilitate Liquid Natural Gas extraction and transport over the next 7 years.

Before and after the LNG flows however, those same global companies will likely spend another $55 billion on infrastructure, including site construction, pipelines, drilling equipment and platforms. Between the Oil Sands and LNG, this area could see substantial investment and spending for at least the next quarter century. Ignoring exposure to the infrastructure space would likely produce a large and significant dry hole in your portfolio.

In a January 30 th research note, Dundee Capital Markets states: "We estimate the capex spend over the next 20 years when accounting for incremental drilling, gas processing and gathering pipelines could hit the $88bn-$219bn range (lower end of range assumes one large project goes ahead, while the higher end assumes three projects get sanctioned); this figure does not include capex related to the construction of exporting LNG terminals and sales pipelines which could add another $16bn to $43bn."

"The issue for exploration and production companies is identifying a top quality infrastructure supplier to coordinate all services with one phone call," stated Desmond O'Kell, SVP and Director of conglomerate Enterprise Group (TSX:E), a diversified construction, utilities and oilfield services company. O'Kell continues: "Global companies such as Shell and Encana demand the kind of established and experienced operation that not only knows the space, but can deliver a cost-effective end to end solution rather than bolting infrastructure assets together using disparate sources."

Even though the LNG build-out and particularly the more mature Alberta Oil Sands are well known mega projects, infrastructure growth so far has just scratched the surface. There are, for example, $22.5 billion worth of Alberta pipeline construction primarily Oil Sands related, of which 75% will likely get built over the next several years.

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