With midstream projects dwindling or failing to pay off, oil and gas investors are turning their attention to more strategic alternatives upstream, and lower-risk projects downstream.

Infrastructure projects, including toll roads, airports and parking assets, have been a staple investment for infrastructure funds. Over the last decade, these investors have been increasingly attracted to midstream oil and gas projects, such as pipelines and liquefied natural gas (LNG) export projects. Such projects have a low commodity risk profile and, as a result, lack the volatility of upstream and downstream oil and gas sectors.

But now both the traditional and the newly popular midstream energy infrastructure projects are virtually drying up, forcing investors with a lot of cash to either sit on the sidelines or consider new investment vehicles.

Having been rewarded for investing in midstream assets, infrastructure investors are now looking closer to the wellhead upstream, where strategic, or diversified, oil and gas companies are investing. Infrastructure investors are also venturing downstream in search of assets structured to fit their investment profile.

With the right structure, both upstream and downstream assets might prove attractive at a time when traditional infrastructure investments have become scarce. Upstream, diversified energy companies may find willing partners in leading oil and gas exploration and transportation companies, delivering competitive costs of capital and allowing strategic partners, such as large, diversified companies, to maintain an equity position. Downstream, infrastructure investors will find creative developers seeking to structure assets that mitigate construction, supply and offtake risks as a way to attract infrastructure investors.

Barring unforeseen major developments, expect infrastructure investors to pay more attention to oil and gas firms beyond the midstream sector in the search for steady returns and relatively low risk.