Midstream ETFs Could Benefit from Transporting Hydrogen | ETF Trends

Even if the United States transitions away from crude oil, midstream stocks and master limited partnership-related exchange traded funds could still pivot away from traditional energy toward transporting hydrogen.

“As you may be aware, the recurring hydrogen theme for midstream has revolved around natural gas pipelines and storage facilities being used for the transportation and storage of blue or green hydrogen over the next decade,” Mauricio Samaniego, Senior Research Analyst, Alerian and S-Network Global Indexes, told Forbes.

“Today, hydrogen initiatives are in very early stages and are mostly focused on blending hydrogen into existing natural gas pipelines, which has been set forth, explored, and/or discussed by Enbridge, TC Energy, Kinder Morgan, and The Williams Company. Additionally, TRP and Enterprise Product Partners have also discussed—and are evaluating—leveraging existing nuclear and petrochemical plants for hydrogen production,” Samaniego added.

Samaniego highlighted a few accessible uses for hydrogen. For starters, midstream operators rely on compression to move natural gas around. A midstream operator could incorporate hydrogen locally sourced from underutilized products like ethane to improve ESG metrics.

Industrial gas turbines are primary movers for most mainline applications. Each of these turbines emits carbon dioxide, which may require adjustments to meet new ESG standards. Within the next 15 years, a projected 5 million horsepower of compression could be replaced.

Gas-fired power plants are also seeing ambitious CO2 reduction targets. To meet these aggressive targets, operators could blend methane and up to 20% hydrogen to cut CO2 emissions.

As a way to meet the hydrogen demand, midstream operators are testing a blend of hydrogen into natural gas pipelines. For example, Kinder Morgan mentioned in an earnings call that it had the technology in place to blend hydrogen with natural gas and move it via pipelines.

To keep tabs on the master limited partnerships and midstream energy space, investors can look to related ETF strategies, such as the ALPS Alerian MLP ETF (NYSEArca: AMLP), the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ), the Alerian Energy Infrastructure ETF (ENFR), and the ETRACS Alerian Midstream Energy Index ETN (NYSEArca: AMNA).

For more news, information, and strategy, visit the Energy Infrastructure Channel.