Shale Oil Boom Will Bolster MLP, Energy Infrastructure Funds

By Tom Lydon, ETF Trends

As the U.S. pumps out more oil, the greater need for energy infrastructure will be a boon master limited partnerships and related exchange traded funds.

According to a recent Interstate Natural Gas Association of America study, North America will require $30 billion a year in investments through 2035, which some say may be conservative, to accommodate the shale oil revolution, reports Javier E. David for CNBC.

The natural gas association calculates that between Canada and U.S. alternative oil plays, at least $2.5 billion will be required per year through 2035 to expand the natural gas infrastructure and another $12.4 billion for crude oil pipelines.

“You have these newer shale developments that are completely underserved by legacy pipeline capacity,” Seth Appel, co-head of energy investment banking at MLV & Co., said in the article. “Over 70 percent of the crude produced in the Bakken [North Dakota] was transported out of region by rail, due to insufficient pipeline capacity.”

MLPs are seeing their fair share of growth as they expand from a cumulative market capitalization of less than $50 billion in 2003 to over $450 billion, Adam Karpf, a portfolio manager for MLP strategies at Atlantic Trust, said.

The the rise of shale oil is producing “rapid growth in the industry,” Karpf said in the article. “MLPs are better able to handle capital spending requirements for U.S. industry. It’s no longer a sleepy industry.”

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Global X MLP (MLPA) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  It currently yields 5.55% (as of 3 April 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

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