Commentary

Global Pipeline and Midstream Industry Outlook 2025: Market Fundamentals Neutral but Political Tailwinds Are Positive

Energy, Natural Resources

Summary

Our outlook for the Pipeline and Midstream Sector (the Sector) is neutral to modestly positive. Asset utilization levels in North America were robust in 2024 as oil and gas (O&G) production reached record highs, primarily driven by an increase in energy exports. While the outlook for crude oil prices in 2025 remains volatile, the fundamentals for natural gas prices in our opinion are constructive. Consequently, O&G production in North America is expected to increase modestly in 2025 and overall asset utilization in the Sector is expected to remain strong. In addition, the Sector is characterized by contracted cash flows, which tend to be relatively stable and typically protected from short-term volatility in energy prices.

Key Highlights:
-- Despite the volatile outlook for commodity prices, O&G production is expected to increase in 2025, and the Sector is expected to maintain strong asset utilization.
-- The Sector will prioritize growth in natural gas assets to service incremental demand driven by LNG exports and AI data centers.
-- A favorable political climate with a promise of lower regulatory burden could accelerate growth in the Sector.
-- Despite ESG considerations receding to the background, the Sector will continue to invest in economic low carbon opportunities like CCUS and renewable power.
-- Overall credit ratings in the Sector are expected to remain stable.

"We expect credit ratings in the Sector to be relatively stable in 2025 and any changes in ratings to be primarily driven by Company-specific factors rather than Sector-specific issues," said Ravikanth Rai, Senior Vice President.

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