Aug. 10–Exxon Mobil is signing on as a major customer on Kinder Morgan’s planned, $2 billion Permian Highway Pipeline to carry natural gas from West Texas to the Houston region.
Irving-based Exxon Mobil is looking for more outlets to transport its natural gas from its rapidly increasing Permian Basin production. While crude oil is the main focus of production, there’s a lot of still-valuable associated gas that comes out of the Permian wells too.
Houston-based pipeline giant Kinder Morgan proposed the Permian Highway Pipeline project in June in a partnership with Midland-based EagleClaw Midstream. EagleClaw is financially backed by the New York private equity giant Blackstone Group.
Kinder Morgan and EagleClaw also are partnered with Houston-based oil and gas producer Apache Corp., which which has the option to buy a one-third stake in the pipeline. Apache announced earlier this week that it’s forming its own Permian-focused pipeline company called Altus Midstream, which would take over the option to buy the stake.
The proposed pipeline would trek from the southern Permian, starting north of Fort Stockton, through much of Texas’Hill Country and terminate southwest of Houston. From there it would connect to existing pipeline networks to deliver gas to the Houston area, as well as Freeport, Corpus Christi and Mexico, which is increasingly importing more American gas for its power generation.
The goal is to build and open the pipeline by the end of 2020. Some details of the pipeline’s route are still being finalized. Some of the main uses of the Permian Highway Pipeline are to supply gas for electricity generation in Texas and Mexico and for new liquefied natural gas export complexes under construction in Freeport and Corpus Christi.
As for crude oil, Exxon Mobil said in June it plans to create a joint venture with Houston’sPlains All American Pipeline to construct a multibillion-dollar pipeline stretching from west of Midland to the Houston and Beaumont areas that would carry oil and condensate.
Plains and Oklahoma-based Magellan Midstream Partners recently expanded their BridgeTex oil pipeline, which has served as the major artery from West Texas to the Houston region. Permian oil production, however, is at a record high and rapidly rising and the lack of pipelines are creating bottlenecks that hamper the pace of growth and create discounts to Permian-produced oil.
Earlier this year, Exxon Mobil said it plans to triple its oil and gas production in the Permian by 2025, while also spending more than $2 billion on transportation and terminal upgrades in west Texas, including expanding its crude oil terminal in Wink.. This joint venture pipeline with Plains would originate in Wink.
And, last year, Exxon Mobil agreed to spend up to $6.6 billion to buy the Permian acreage of Fort Worth’s prominent Bass family to more than double its Permian acreage holdings.
Back to Kinder Morgan, the Houston firm already is leading the construction of the $1.7 billion Gulf Coast Express Pipeline that would stretch farther south from the Permian to just west of Corpus Christi in Agua Dulce. Apache also is an anchor customer on that project, slated for completion in fall 2019.
As for competing projects, Houston pipeline firm Targa Resources said in August it is teaming up with a bevy of partners to build a 600-mile natural gas pipeline system from the Permian to the Corpus and Houston regions. Targa aims to build the Whistler Pipeline project from the Permian in partnership with Florida’s NextEra Energy, Ohio’s MPLX and some private equity investors. MPLX is the pipeline arm of Marathon Petroleum.
Likewise, the planned Pecos Trail pipeline to Corpus Christi is proposed by Houston-based NAmerico Energy, a 3-year-old venture backed by private equity.
Also, the Houston liquefied natural gas exporter Tellurian is developing the proposed Permian Global Access Pipeline, a 625-mile project from West Texas to southwestern Louisiana, to serve Tellurian’s planned Driftwood LNG export terminal and other projects.
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