Energy Value Chain Investment Themes in 2012

Abstract

While we may not have a better crystal ball than anyone else, in our advisory work, we do have good visibility on what folks are looking at and where the money is going. Without betraying any confidences, we have assembled a high-level perspective on some of the activity, trends, and outlook that we are seeing in our advisory work along the energy value chain, including upstream oil and gas, midstream pipeline storage and refining, downstream petrochemicals, and related infrastructure. We see three key investment themes, in terms of real assets. We anticipate dry shale gas investments to continue to decline and to be redirected to secure supply for potential LNG export and Gas-to-Liquids (GTL) from Canada and the U.S. Gulf Coast, and for long-term feedstock to supply the newly competitive, growing, chemicals business. Investment continues movement toward emerging liquids-rich plays with low entry costs and considerable technical risk. High costs magnify execution risks – such as the ability to attract service providers, regulatory risks, and escalating drilling and completion costs. Production from liquids-rich plays will continue to drive significant “ripple-effect” investments in the midstream, downstream and related infrastructure and services. We anticipate continued activity as play activity and production outstrip the current and planned infrastructure in the Marcellus and Eagle Ford, for gathering systems, export, NGL processing and deep cut ethane.