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T.J. Thornton:
Hello and welcome to Global Research Unlocked, where we discuss what's rising, from growth industries to rising risks and opportunities in global markets. I'm T.J. Thornton, Head of Product Marketing at BofA Global Research, and we're recording this episode on Friday, June 27, 2025.
Jean Ann Salisbury:
Right now, just for round numbers, total demand of gas in the U.S., including exports, is about 110 billion cubic feet per day. That's going to grow by 20 for the next five years, and I think that all of the projects that are LNG (Liquefied Natural Gas) based that are being announced right now, that would come on in kind of the 2030-plus timeframe would just add to that number.
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T.J.:
Additional natural gas pipelines can help to boost demand for gas, while also providing a fuel source for new or expanded gas power plants. But historically, at both the federal and local level, there have been steep challenges to constructing incremental pipelines. That is changing, and that could have implications for everything from the midstream companies that own these pipes to electricity bills. Joining us today is Jean Ann Salisbury, who covers Integrateds, Refining and Midstream for BofA Global Research. Thanks, Jean Ann, for joining us.
Jean Ann:
Yeah, thanks for having me.
T.J.:
Jean Ann, you recently wrote about the 12 pipelines that you added to your pipeline map. Is this all since Trump was inaugurated and could local opposition still threaten any of these or are we pretty certain that they're going to get built?
Jean Ann:
All of the ones that were in our pipeline map that we wrote about recently have been since Trump were inaugurated, but I think that there's really three major things that's driving what I see as a gas pipeline boom. One is the Trump support, and I think that has most come into play in areas like the northeast, where it has historically been impossible to build across states that had opposition. That has definitely helped. I think five of the 12 projects that have been announced are in the northeast, and that's after years of zero projects in the northeast. I do think that the second thing that has been driving this pipeline boom is utilities coming to the table, and they're willing to sign up for higher rates. And I think that over the last maybe year or two, there's just been this reckoning among utilities, not completely, but partly driven by data centers, that over the 2030s and beyond, they will probably still need gas and gas growth. They're coming to the table and willing to sign higher rates because in the U.S. right now, pretty much every gas pipeline is full. If you need to get more gas, then you will need to build a greenfield, brand new pipeline or do a project that is much more costly than what you're paying now, and so they put that off for the last five years, ten years, and now the reckoning has come. The third thing that's been driving a lot of these gas pipelines is this LNG project boom. I think that all of the LNG projects that have been announced since Inauguration Day have really been driving a lot of the gas pipelines to support them as well. To your question of could local opposition still threaten any of these? We'll find out. We've only hit the first wall so far. If we look back at the past, Constitution Pipeline was probably the most famous, that was in New York. It was around eight years ago at this point, and the governor at that time, Andrew Cuomo, wouldn't give the state water permit to build across New York and that basically killed it and some others. Trump has gotten involved in that exact issue. The state water permit won't be an issue. The governor has said that she won't block that. There could be other super-local issues that we just don't know about yet, but I think the utilities are much more motivated today to get it done than even five years ago, that they're worried about their supply. There certainly could be still local opposition, but I think it's looking more likely than it has than in the last eight years, ten years, that U.S. covered the sector.
T.J.:
Okay, great. 12 pipelines seems like a lot, but just how helpful is that for growth rates for your midstream companies?
Jean Ann:
I think a year ago I was projecting low- to mid-single digit EBITDA (Earnings Before Interest Depreciation and Amortization) growth for the gas pipeline companies, and that was what they had grown in recent memory. Now we're looking at mid- to high-single digit, and there's the potential for some of them that are really gas focused or really in these areas to be at 10% EBITDA growth-plus every year through 2030. I'd say it's kind of in the 500 basis points on average, but I think there's the potential for it to be more if some of these projects go forward. If you covered tech, maybe that doesn't seem like that much, but for somebody who's covered midstream, it's very exciting.
T.J.:
Now, thinking again about what could go wrong: you talked about the potential for local opposition, even though it may not be all that far up the list, but I also hear other analysts of ours talking about long lead times for gas turbines. You can't necessarily put up a gas plant in a few months. Is that a potential problem where maybe there just won't be the gas plant demand to meet the capacity that all of these pipelines can provide?
Jean Ann:
The gas turbine constraint is definitely an important constraint. Just to put into perspective though, what is driving the demand for gas? What is driving these gas pipelines? Most of the demand being added is actually for LNG, liquified natural gas. Just to give some perspective, data centers and utility demand add, it's 4% to demand total by 2030, so that's not 4% a year, that's by 2030. We think a 4% total add to demand is, again, from the data centers and utility demand for gas. LNG is closer to 11, 12% demand add by 2030, and that number is going up with all of these new LNG projects going forward. Some of these extremely high outlooks for data centers will probably get constrained by turbines. I know that our utility analyst has a mid-range and a high range for what could be gas, but I think that, by and large, if the LNG that's under construction and that's being announced goes forward today, that's really over 80% of what's driving the activity. I think you can also run existing gas plants a little higher and the turbines that are coming to market can get you to basically our mid-range forecast, but I think as the turbines come to market faster in the 3-, 4-, 5-year period, I think you could see that portion of it speed up as well.
T.J.:
Alright, quick history lesson on midstream. More recently, these stocks have performed pretty well, at least in absolute terms, but if you look back over 10 years, many of them have done little. They're kind of where they were 10 years ago. Even as the S&P tripled over that period, so why the lackluster performance historically and why do we believe that it's really different now?
Jean Ann:
As someone who's covered the midstream sector for 10 years, I was definitely there for the derating for most of that period, and I think that if we just look over the last five, there were probably two major things that changed. The first one was just that E&Ps (Exploration and Production), the producers of oil and gas, were for a long time not considered great counterparties, and so some of the pipeline counterparties or utilities, some are the E&Ps and especially in the 2019/2020 period, there's a lot of concern that if E&Ps had balance-sheet risk that would spill over to the midstream. That created kind of an overhang on the midstream stocks for several years. I think that the other thing that has finally changed, I would say, is that for most of the last, maybe not 10 years, but certainly in the last seven, is just that the expectation of how much terminal value there would be for gas, how long gas demand in the U.S. would grow, has moved up a lot. If I even look back at 2022, people's long-term U.S. gas supply, gas demand forecasts after 2030, there was almost no growth for any of them, and then by 2040s, most people's forecasts were in decline, and I think a lot of people in oil and gas didn't think that was that realistic. If you had any kind of industrial or electricity growth at all, it was hard to believe that wind and solar would be able to pick all of that up, but I think that was basically what was priced in. And then I think it happened at the same time as data centers. It was not all due to demand from data centers, but it all happened at the same time that I think that people just started to update their forecast in the 2030s and 2040s and say, "Oh, wow, actually, I think there probably is 2% a year growth through the 2030s and maybe the 2040s as well," and that has really been the biggest driver for the rerating of the gas midstream stocks is that rather than just no growth in demand, no growth in projects for the next 15 to 20 years, you actually have very healthy growth for the next five and then modest growth after that.
T.J.:
Got it. Switching gears a bit to natural gas itself: these pipelines will mean more demand for natural gas. There's obviously an LNG story that's driving some of the pipelines and that also can help to drive prices potentially of natural gas in the U.S., so what's the outlook for natural gas prices and how helpful are these new pipelines when it comes to incremental demand for gas?
Jean Ann:
It's a great question and I think one will become very top of mind over the next few years. Right now, just for round numbers, total demand of gas in the U.S., including exports, is about 110 billion cubic feet per day. That's going to grow by 20 for the next five years, and I think that all of the projects that are LNG based that are being announced right now, that would come on in kind of the 2030-plus timeframe would just add to that number. At some point, the U.S. is really sending out 25% of its production, 30% of its production, and you need that much growth. You'll not be able to provide that at the $3 to $4 for MMBtu (one million British thermal units) that the U.S. has provided it in the past. I think that the other thing that will happen over the next 10 years is that oil production will slow and hit a plateau, so you won't get as much free gas from those basins, which will also contribute to the rising cost of gas from the gas basins. I think you'll have to go to other basins in the U.S. for gas that are higher cost that have not really been used much in the last 10 or 15 years. This is actually a great business for the gas pipelines. If we now need to connect far-flung basins to the coast to export LNG, that will lead to a lot of even new projects that aren't even on my map yet. It will raise the price of nat gas in the U.S. to $5 or even above that in the 2030-plus timeframe if all of these LNG projects go forward, and I think that's the biggest driver.
T.J.:
Okay, and on LNG: is there a concern that there could be a glut? You're enabling more production because of these pipelines, maybe you'll have to even hook up more of them. We're talking about adding nuclear capacity, especially elsewhere in the world. Is this a concern ultimately that maybe there's too much LNG supply?
Jean Ann:
Yeah, I think that's a real concern for the industry. If you look back at the LNG industry, it's always been cyclical. It takes three or four years usually to build these LNG projects. If you look back over the last 25 years, it's always been three or four years of high prices and then everybody decides to build. Then you have three or four years where all that LNG comes on and prices go low. That cycle is about to start again, where you haven't really had any major projects come on the last three or four years, and over the next three or four years, everything that got announced since the Russia/Ukraine conflict and prior will go forward. You've had periods in the past where you've brought on kind of 10% of supply a year, three- or four-year period. What we're looking at from here, though, maybe 10% a year for 5, 6, 7 years, depending on how much goes forward this year. I think it could be a challenge if everything that's been announced and has been juiced almost by "Liberation Day" goes forward this year. It's hard not to see a glut of LNG in the back of this decade.
T.J:
Okay. I'll pivot again this time to the northeast, which you mentioned at the top of the podcast. I think you said about five of the 12 pipelines that you added to your map were in the northeast. The northeast has been dealing with really high power prices for many years. Earlier this week, I was looking at a chart in Ross Fowler's note that showed electricity prices by state, or I guess it was bills by state, and Connecticut was the highest, and I wanted to reach for my phone immediately and turn up my AC to 80. Fortunately, it's cooled off, but the next time it gets to a hundred degrees my AC absolutely will be at 80 degrees. But you point out that some of this pipeline capacity is in the northeast, so could this ultimately shrink electricity bills and how soon could that happen?
Jean Ann:
Yeah. This actually ties a bit to the opening question, just that the mood has shifted and things have come to a head, so I agree with you. Even in my own life, in January, it was cold in New York, and our utility bill was almost triple what it had been in prior Januarys, and I think that caught a lot of people's attention. It definitely made us keep it pretty cold in February in the house, that wasn't super popular here. But that is also giving the governor of New York some cover to allow the gas pipeline through this time, which we talked about before. I would say that there's two specific projects out of that five. They're called Millennium and Constitution, and I think if both go through, you should see some relief in New England and New York, as it should allow a little more gas at lower prices from Pennsylvania to come here through the winter. Right now, what's happening is on the margin, we're basically pulling it from Canada, and they usually need it themselves during those exact same days in January, February, so we'll see. Again, there could be some very localized opposition that we're not accounting for, but I think if both of those projects come in, they would be on in kind of the 2028 timeframe, if all goes as well, and I think that would help quite a lot with winter pricing.
T.J.:
Okay. Understood, and I believe you're in the city. I'm in, call it rural Connecticut, and I’ve discovered the wood stove, which is also a very good way to deal with high power prices or high gas prices.
Jean Ann:
I like it — off the grid.
T.J.:
I don't think that works so well in the city, but up here it gives you something to do over the weekend. Great. Thanks, Jean Ann, very much for an awesome discussion.
Jean Ann:
Yeah, thank you for having me.
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T.J.:
There's been a big change in the outlook for gas pipelines, and much of that change has come in the last six months. Interestingly, too, almost half of these new pipelines are in the northeast, a region that had been historically resistant. It's because of a confluence of factors from President Trump's support to LNG projects to utilities coming to terms with the fact that there will be demand for gas in 2030 and beyond. And new pipes are meaningful for midstream growth. Some companies will see growth in the high single digits and even double digits In some cases. This is much higher than where it had been running. It should last for years, and we will probably see more project announcements in the near future. It all underpins a fairly bullish view on natural gas prices and could even offer relief to utility customers in the northeast later this decade. Thanks for joining.
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