MAGELLAN MIDSTREAM PARTNERS, L.P. (MMP)

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Growing need for pipelines strains manufacturers

August 1, 2012

The shale oil boom has led to surging demand for new oil pipelines in the middle of the U.S., which manufacturers are finding difficulty keeping up with, according to Reuters.

Much of the current American oil pipeline infrastructure was constructed in relatively ad hoc projects that rarely required extensive manufacturing capacity.

As shale oil exploration begins to make producers out of states that previously had little impact on the oil industry, such as North Dakota and its Bakken shale play, pipeline companies have begun purchasing manufacturers for key components such as valves, driving up prices for other projects.

"New infrastructure is going to be critical to push these commodities around the country where they need to be," David Seaton, chairman and CEO of engineering company Fluor Corp., told Reuters. "It's going to be the lifeblood of economic growth for my lifetime."

In the meantime, Dow Jones Businesswire reports that the first major deal has been struck bringing Bakken shale oil down the Mississippi by barge, a method that is already common for Canadian oil sands.

PennEnergy's Research area projects the outlook for the U.S. oil pipeline industry.