Midstream in a power-constrained energy landscape

For much of the past decade, midstream infrastructure was widely viewed as a sector in structural decline, as investors questioned the long-term role of fossil fuels in a changing energy landscape. Concerns around terminal value, utilization and long-term demand weighed on valuations and limited investments.

That outlook has proven overly pessimistic. Power demand is growing faster than expected even a few years ago, driven increasingly by artificial intelligence-related data center development, electrification and industrial growth. At the same time, energy security and grid reliability have re-emerged as central priorities, reinforcing the role of dispatchable energy sources and accelerating investment across the broader natural gas value chain.

The result is an expansion toward an “any-and-all” energy framework in which multiple energy sources are required to meet rising demand. Rather than reducing the importance of energy infrastructure, the evolving energy mix has increased the value of assets capable of delivering reliable and scalable supply. 

Within this framework, natural gas has assumed a critical role, while growing liquefied natural gas (LNG) exports have reinforced the importance of North American supply in global energy markets. Midstream infrastructure is essential to connecting supply basins with end markets and enabling the movement and delivery of energy.

Resilience by design

The resilience of midstream infrastructure is driven primarily by two characteristics: long-term contracted cash flows and the essential role of irreplaceable systems. This resilience has become increasingly important as demand expectations across the sector have improved dramatically from where investors expected them to be only a few years ago.

Much of the sector benefits from long-term take-or-pay contracts or regulated tariff structures that provide visible cash flows with limited direct exposure to commodity prices or volume fluctuations. Many of these agreements are supported by  investment-grade counterparties that have contracts extending up to 25 years, often with renewal or extension options.

Other parts of the sector benefit from high usage rates, strategic positioning and a lack of competitive alternatives. In many cases, these assets represent critical energy corridors with limited practical substitutes.

Colonial Pipeline—the largest U.S. refined products pipeline system—illustrates how certain midstream assets consistently maintain high utilization across commodity cycles and periods of economic stress (Figure 1). 
 

A re-rated sector

Improving fundamentals and stronger demand expectations have driven a meaningful re-rating across the midstream sector. Public market valuations, which for years reflected concerns around enduring utilization and terminal value, are increasingly supported by stronger growth expectations tied to LNG expansion, rising power demand and increasing infrastructure investment. 

Natural gas infrastructure has outperformed liquids assets and is now trading at premium multiples (Figure 2), reflecting increasing confidence in the role of gas within a more power-intensive energy landscape.

Selectivity drives outcomes

While the sector benefits from improving fundamentals, investment outcomes remain highly dependent on asset quality. Assets connected to low-cost supply basins and inelastic demand centers—including LNG export facilities, utilities and industrial markets—are better positioned for long-term success.

Assets positioned to benefit from rising power demand, LNG expansion and growing infrastructure requirements are attracting both strategic buyers and financial capital, especially where existing infrastructure can support expansion more efficiently and at lower cost than developing new assets.

Active ownership is particularly important in midstream infrastructure, where value creation is often driven by operational and commercial optimization over time. Existing networks can frequently support incremental expansions, de-bottlenecking projects and new customer connections at attractive returns relative to new-build infrastructure.

Opportunities also exist to improve contract structures, optimize utilization and expand ancillary revenue streams across existing asset footprints. As power demand and LNG export capacity continue to grow, well-positioned infrastructure assets are increasingly able to participate in future network expansion with comparatively lower execution risk and capital intensity.

Acquisition opportunities and exit optionality

Over the past decade, the number of publicly listed midstream companies has declined from 74 to 31 while the scale of remaining platforms has increased (Figure 4). Consolidation across both upstream and midstream markets has concentrated ownership among larger operators and created opportunities to acquire non-core assets as companies rationalize portfolios, divest overlapping infrastructure and focus on core businesses.
 

A durable investment opportunity

Midstream infrastructure has re-emerged as essential infrastructure within a more power-intensive and supply-constrained energy landscape. Long-term contracted cash flows, high utilization and embedded expansion opportunities continue to support resilient earnings, while AI-driven power demand, LNG growth and improving investor sentiment have created one of the most attractive environments in years for both acquiring and monetizing high-quality assets.