North American midstream firms benefit from LNG, AI demand

North American midstream companies are expanding pipelines, storage terminals and natural gas processing plants as rising U.S. LNG export capacity and growing demand from AI data centers increase flows across the United States and Canada. Projects are linked to multiyear, fee-based contracts that provide predictable revenue streams.

Companies that operate pipelines, storage and export facilities are booking projects tied to contracts that commonly include annual inflation adjustments. Stacey Morris, head of research at VettaFi, said in a recent interview, “What’s really unique about the midstream space is that it generates stable cash flows.” Analysts view those contracts as providing steadier receipts than upstream production, which depends more on commodity price swings.

On the LNG front, projects already under construction in the United States are expected to roughly double U.S. export capacity by 2031. Canada is advancing liquefaction projects on its west coast aimed at Asian and European buyers. Geopolitical strains in the Middle East have tightened some supply routes, prompting importers to seek additional volumes from North America.

Large data centers that run AI workloads are creating direct demand for on-site power supplied by natural gas. Cloud providers and data-center operators are contracting with midstream firms for dedicated gas deliveries and building lateral pipelines to campuses and data parks. Enbridge has targeted more than 50 data center opportunities, and Williams has outlined nearly $10 billion of projects related to data-center power and connectivity.

Market signals have shifted in recent months. The oil futures curve for 2027 and 2028 moved higher, near $75 per barrel compared with below $60 earlier in the year. One forecast projects U.S. oil output could rise by about 400,000 barrels per day year over year in 2027, a change that would require additional gathering, pipeline and processing capacity for oil and associated gas plays.

For investors, midstream contracts often include index-linked fees that adjust for inflation. Many midstream operators have been returning capital to shareholders through dividends and share buybacks. Exchange-traded funds focused on master limited partnerships or a mix of MLPs and corporations provide passive exposure; underlying indexes for two widely tracked midstream ETFs were yielding about 7.0% and 4.7% as of June 11.

Midstream firms face project-execution risks, regulatory reviews for new pipelines and differing permitting timelines across U.S. states and Canadian provinces. Despite those challenges, project backlogs tied to LNG exports and data-center power needs have kept a pipeline of work active across North America.