Understanding Midstream’s Role in the Energy Transition | ETF Trends

With growing pressure to decarbonize, carbon capture and hydrogen could provide viable solutions in the future, particularly for sectors with hard-to-abate emissions critical to the economy, according to an October 2021 insight from VettaFi.

Midstream companies are actively evaluating ways to participate in this evolution, and some are partnering with other energy firms to pursue opportunities around hydrogen, carbon capture, and renewable fuels. 

The ability to safely move and store energy — whether it is oil, natural gas, renewable fuels, hydrogen, or byproducts like captured carbon dioxide — will be needed for decades to come, according to Stacey Morris, CFA, head of research for VettaFi.

“The world is focused on reducing carbon emissions, but I think what investors need to know is that midstream has an important role to play in this,” Morris said earlier this year during a livecast hosted by VettaFi. “The ability to store new energy and do that safely is going to be an asset through this energy transition. What we’ve seen is that a number of companies are looking to partner with midstream players and take advantage of that expertise as we move through the energy transition.”

According to Paul Baiocchi, chief ETF strategist at SS&C ALPS Advisors, the expertise that midstream companies have in building networks of pipelines and storage and processing facilities is essential to emerging renewable energy and climate change-oriented initiatives. 

Baiocchi said the implementation of hydrogen will take place at scale once it’s proven to be economical, and a pipeline that currently moves natural gas or crude oil could, in theory, move hydrogen around the country. “Companies have talked about how they can do that with minimal blending but also at a high level,” Baiocchi said.

“If your expertise is infrastructure designed to move, to transport, and process molecules, it doesn’t have to be crude oil or natural gas. It can be applied in any number of ways, and the reality is, is there’s companies out there who are looking for partners with expertise in this category, and these companies are stepping up to the plate to provide it,” Baiocchi continued. 

The Alerian Energy Infrastructure ETF (ENFR) and the Alerian MLP ETF (AMLP) offer midstream exposure. 

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

vettafi.com is owned by VettaFi, which also owns the index provider for ENFR and AMLP. VettaFi is not the sponsor of ENFR and AMLP, but VettaFi’s affiliate receives an index licensing fee from the ETF sponsor.