The Case for Midstream in the Energy Transition

Midstream companies can use their existing assets to participate in opportunities related to responsibly sourced gas and carbon capture and sequestration, according to Stacey Morris, CFA, director of research at Alerian.

With growing pressure to decarbonize, midstream companies have the unique opportunity to provide the backbone necessary to facilitate the use of cleaner energy, and are likely to benefit from short- and long-term clean energy opportunities as progress is made around renewable fuels, carbon capture, and hydrogen.

“Even as the world moves towards decarbonization, recent geopolitical events and corresponding price spikes in oil and natural gas have highlighted how much our global economy is still dependent on these fuels,” Morris wrote. “Oil and natural gas will likely play an important role in the energy mix for decades, but steps can be taken to produce and consume oil and natural gas with fewer emissions.”

According to Morris, energy companies are already focused on solutions to produce fewer emissions, and responsibly sourced gas (RSG) and carbon capture and sequestration (CCS) are pertinent examples where midstream can play a supporting role while leveraging existing assets. Over 100 new CCS facilities were announced globally last year, Morris wrote.

Midstream companies are also helping ensure that customers can source conventional natural gas in a more environmentally-conscious way. RSG is natural gas produced with adherence to certain ESG criteria, particularly around methane emissions, water consumption, and community relations, according to Morris.

Midstream companies are partnering with third parties that provide comprehensive emissions monitoring solutions as RSG buyers understandably want to better understand the emissions profile of processing and transporting that RSG.

Investors can gain exposure to the industry with the Alerian Energy Infrastructure ETF (ENFR ) and the Alerian MLP ETF (AMLP A).

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