GPA '19: Executive views on Midstream industry through 2030

By Adrienne Blume, Executive Editor

SAN ANTONIO—At Monday afternoon's executive roundtable at the GPA Midstream Annual Meeting, Muse, Stancil and Co. Director and Managing Partner (Houston) Ajey Chandra quizzed four midstream executives on their views on the present and future of the midstream industry and its workforce.

Panelists included Michael Garberding, President and CEO of EnLink Midstream; Sital Mody, President of Kinder Morgan Midstream; Robert Phillips, Chairman, President and CEO of Crestwood Equity Partners; and Scott Pryor, President of Logistics and Marketing for Targa Resources.

Midstream changes tack. Mr. Chandra first asked the panelists how companies are employing capital discipline in the midstream. Mr. Phillips said that the industry has been using more discipline in capital allocation since recovering in 2015/2016 from the last downturn. "Capital programs have shifted from 'build it and they will come,' to 'build it to suit,' and to more credit-worthy projects," he said. Facilities were being built with excess capacity, but the industry has switched to a philosophy of less is more.

Mr. Garberding said that stakeholder value creation starts with "focusing on the right projects around core assets." He added that the industry is seeing partnerships between different, even competing, midstream companies "because it's the right thing to do."

Mr. Mody noted that Kinder Morgan has sought to create long-term shareholder value and reward investor interest by establishing a process wherein the company sets expectations on returns with investors and shareholders. "We're focusing on achieving toll road-type returns [on investments]," he said.

Mr. Pryor emphasized the need to ensure that the timing of midstream projects is well-aligned with what producers are doing and growth forecasts. Targa is moving both upstream and downstream, and focusing on integrated gas processing, to ensure that the company is not missing opportunities for future growth.

Conquering public perception. Later in the discussion, Chandra noted that public perception is often against the industry, and asked the panelists how they are addressing the perception among younger generations that fossil fuels are dirty. Garberding said, "You have to ensure that you're part of the community and the process, and start at ground level. We as an industry have not always done a good job of that."

All of the panelists agreed that more public education is necessary so that people understand how much of a part of daily life are the products created by the wider oil and gas industry. Phillips touted the commendable operating principles and high standards of oil majors, such as Shell, as examples for the midstream sector to follow. "We have to employ sustainability like the majors do," Phillips said.

Pryor added that GPA Midstream is a great place to learn best practices, with many reports and presentations on safety and environmental issues.  "It enables us to share outwardly with one another, and helps make us, as an industry, so much better," he said.

Preparing for the future. Toward the end of the roundtable, Chandra asked the executives what their companies are doing to address the Great Crew Change. Mody explained how Kinder Morgan goes through its employment roster every year to see what new levels of training and leadership are needed.

Phillips said that around one-third of Crestwood's workforce is made up of Millennials, and that the company has active programs for leadership, community engagement, diversity and inclusion, and mentoring. Crestwood is a platinum sponsor for the Women's Energy Network, among other initiatives.

"We need to get colleges to remember that we are part of the solution and not part of the problem," Phillips said. Garberding added that young workers need to remember that "it's a world business, it's not just the business you're working on today."

Midstream through 2030. In closing, Chandra asked the executive to comment on their views of the midstream industry over the next 5–10 years. Phillips remarked, "We have decades of additional development that will take place at different times and in different ways, just at the wellhead alone."

The industry is more financially healthy, more capital investment is being seen, and performance is rising to bring investors back to the midstream space, Phillips added. "The financial health of the industry is improving, and higher-quality projects are going forward."

Pryor noted that for US petrochemical exports, the focus will be first on derivatives, then ethylene and then ethane, based on the number of markets and ports of call. Continued growth will be seen over the next five years.

Garberding expects to continue seeing partnerships and JVs coming up with consolidated solutions, while Mody forecasts a bigger move by the midstream to total global integration. "We're very well integrated into the US, but we'll see that more globally—that's when we'll see the power of our industry," Mody said.

The GPA Midstream Annual Meeting is taking place in San Antonio from April 14–17.

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