Challenges in US Energy Infrastructure and Investment

1. Challenges in US Energy Infrastructure
and Investment
November 15, 2018

2. The US energy infrastructure is huge, varied and growing
• Oil and Gas
– Upstream/Production
• 11.0 mmbd crude oil/3.4 mmbd NGL production (September 2018
estimate)
• 83 bcfd natural gas (July estimate)
– Midstream
• 216 k miles of liquid pipelines/319 k miles of natural gas transmission and
gathering pipelines
• 1265 refined product terminals /330 ports handling crude petroleum and
refined petroleum products
• 414 natural gas storage facilities, 9.3 tcf capacity
• 550 natural gas processing plants, over 5mmbd of NGL fractionation
capacity
– Downstream
• 135 operable refineries (January 2018) /18.6 mmbd capacity
• 3.6 bcfd LNG capacity (June 2018)
• Power
– Generation
• 1.1 million mw capacity (August 2018)/ 4058 billion mwh generated (2017)
• 9,200 electric generating units (having more than 1 megawatt of capacity)
– Transmission and Distribution
• more than 640,000 miles of high-voltage transmission lines
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3. US energy is an important component of US trade with
exports of all commodities growing
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Exports Imports Net Exports
Crude oil (mmbd) 2.2 7.8 (5.6)
NGLs (mmbd) 1.7 0.1 1.6
Refined Products (mmbd) 3.5 2.5 1.0
Natural Gas (bcfd) 10 8 2
Source: October 2018 US DOE/IEA Monthly Energy Review (estimates for September 2018)

4. US investment in the energy industry in 2017 was nearly
$300 billion, about 16% of global total of $1.8 trillion.
$billion
Energy Supply
Oil and Gas
Upstream 70
Downstream and
Infrastructure
49
Coal
Mining and
Infrastructure
2
Power Generation
Fossil Fuels and
Nuclear
18
Renewables 41
Electricity
Infrastructure
Transmission and
Distribution
65
Energy Demand Energy Efficiency 42
Total 287
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Source: IEA World Energy Investment 2018

5. Challenges – Existing Infrastructure
Age and Functionality
• Most high-voltage transmission infrastructure was constructed prior to
1980 and cannot accommodate growth and anticipated future uses of the
grid. Investments for grid modernization projects are estimated to cost
$350 billion to $500 billion
• Nearly 50 percent of the United States’ natural gas pipeline infrastructure
was built prior to 1970 and replacing outdated pipelines will cost an
estimated $270 billion
• More than one third of US crude oil pipelines were built before 1960.
• About 250 miles of oil products pipelines will need to be upgraded,
replaced or refurbished each year through 2035, requiring approximately
$250 million–$500 million in annual investment
Vulnerability to Extreme Weather
• Severe storms and floods represent the most significant threat to overall
grid reliability with weather-related outages costing $20-30 b per year.
Security
• Cyber and physical threat events are becoming more common. More than
half of the cyber incidents the Department of Homeland Security has
recently responded to have involved energy installations
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6. Challenges – New Investment and Infrastructure
Continued Growth in Oil, Gas, and Electricity Production (DOE 2018 AEO
Reference Case)
• US liquids production grows to 17 mmbd (2030)
• US natural gas production grows to 105 bcfd (2030)
• US electricity generation grows to 4500 billion kwh (2030)
Shift from Oil and Gas Imports to Exports
• The US is becoming a significant natural gas exporter, placing new
demands on transmission and storage infrastructure as much of the
existing natural gas infrastructure is oriented around imports. Significant
investment is required for pipelines, natural gas and NGL processing, and
LNG/NGL export facilities.
• Growing oil production has displaced imports and allowed for exports,
reversing long-standing flows of crude oil within the US. Significant
investment is required for crude oil pipelines and export facilities
• US refinery production is increasing creating investment requirements for
light crude processing and product export facilities
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7. Challenges - Regulatory and Business Model
Changing Power Generation Profile, Grid Requirements, and Business
Models
• Growth required in renewable and gas power generation to replace coal
• Investment needed to integrate variable and distributed generation
capacity including electricity storage and smart grid technology
• Build-out of vehicle charging infrastructure
• Role of vertically-integrated electric power utilities and centrally-
organized electricity markets (RTOs/ISOs)
Regulatory
• Most energy infrastructure is subject to more than 35 separate permitting
responsibilities spread across 18 federal agencies.
• State governments are implementing renewable generation mandates,
GHG and pollutant reduction rules and challenging use of eminent domain
for infrastructure
• Local governments and communities are increasingly imposing zoning and
health restrictions and in some cases bans
• Landowners are increasingly complicating right of way access and
environmental NGOs are increasingly targeting infrastructure projects in
efforts to slow/stop fossil fuel resource development
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