Many observers outside of the industry may not realize that much of the nation's energy infrastructure—including oil and gas wells, pipelines, holding tanks and a broad range of other equipment—is actually owned by investment firms called master limited partnerships (MLPs).
In a recent article, Associated Press reporter Jonathan Fahey explained that these investment vehicles have become especially popular in the last few years as interest rates have remained low and investors have been forced to search for new opportunities to generate income in a low-yield environment.
Fahey spoke to financial analyst Ethan Bellamy, who said that many advisors are recommending that their clients invest in mid-stream assets such as pipelines, as this allows them to avoid exposure to some of the volatility associated with oil production equipment and finished petroleum products.
"It's a great way to invest in this massive resource in the U.S. without the commodity risk," Bellamy explained.
The analyst noted that there is still some risk facing investors, as a rise in interest rates could spur people to start selling off their shares of energy-related MLPs and reinvesting in more traditional assets. However, the ongoing growth of the U.S. oil and gas industry could cause many to maintain a stake in the sector.
As we discussed in a recent blog post, the U.S. House of Representatives is currently considering a bill that would set strict time limits for federal officials charged with reviewing permit applications related to the construction, expansion and operation of natural gas pipelines. The increased level of regulatory certainty that this bill would provide could make the market for energy infrastructure more attractive to investors.