Demand for natural gas and oil infrastructure equipment is on track to rise 6.3% a year between now and 2016 when it will total $12.1 billion, according to a report by industry market researcher The Freedonia Group Inc.

Advances in the infrastructure sector are benefiting from unconventional onshore development, especially in areas that have not until recently been considered big energy producers, researchers said. These emerging areas are expected to require new or bolt-on infrastructure to economically transport new natural gas and oil resources from the well site.

For example, pipeline capacity at the Bakken Shale in North Dakota and Montana is expected to more than double by 2016, led by “strong” growth in that formation as well as the more mature Eagle Ford Shale in Texas and the Niobrara formation in northern Colorado and Wyoming.

Gas and oil infrastructure equipment demand should grow as well as upstream drilling activity strengthens, according to the study.

“Much of this drilling activity is happening in previously dormant or nontraditional areas, which has created a demand for oil and gas infrastructure,” said the Freedonia researchers. Part of the reason is because low natural gas prices have caused many producers to move drill rigs from dry gas areas into the more lucrative liquid plays.

“However, natural gas prices, while currently low, are expected to recover by 2016,” the researchers said. “Expectations of this recovery are boosting demand for natural gas pipelines in areas such as the Marcellus Shale.”

Besides unconventional growth, Freedonia researchers see “significant pipeline opportunities” as interstate pipelines are expanded. The “most notable” project now on the list is the controversial Keystone XL oil pipeline, which would deliver crude oil from Canada’s oilsands to Gulf Coast markets. The final portion of the project is awaiting approval by the U.S. government and “such action is expected within the forecast period.”

Demand for pipe “will benefit from construction of new transmission lines and the need for gathering systems at new drilling sites” as well, according to the study. “Plastic pipe will post faster gains than steel due to widespread use in gathering applications. However, steel pipe will remain the dominant material because of its high pressure resistance.”

In addition, demand for equipment such as valves, pumps, and compressors should benefit as pipelines are built or expanded “since this equipment is necessary to manage oil and gas flow through the system.”

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