June 25–Pipeline firm Kinder Morgan, intent on dominating natural gas transportation from West Texas’ booming Permian Basin, on Monday announced plans to build a $2 billion pipeline to deliver gas to Houston, Corpus Christi and Mexican hubs.
It’s the company’s first major project announcement since pulling out of its massive Trans Mountain oil pipeline expansion project in Canada in the face of intense opposition from environmentalists and British Columbia’s provincial government. Kinder Morgan sold that project to the Canadian government for almost $3.5 billion.
The new deal sees Kinder Morgan placing an even greater focus back in Texas, where there’s a race underway to build new crude oil pipelines from the Permian to ports and refineries along the Gulf Coast. But the Houston-based company is focused on carrying all of the associated gas — more than many companies had projected — that’s also produced from the oil wells.
The proposed 430-mile Permian Highway Pipeline project is being developed with Houston oil and gas producer Apache Corp., which has the option to buy a one-third stake in the pipeline. For now, though, Kinder Morgan is a 50-50 partner on the project with Midland-based EagleClaw Midstream. EagleClaw is financially backed by the New York private equity giant Blackstone Group.
The 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.
Kinder Morgan, one of North America’s largest pipeline companies, 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 is an anchor customer on that project, slated for completion in fall 2019.
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.
The idea is to provide natural gas producers in the Permian Basin with as many options as possible on where to sell and deliver their gas, said Sital Mody, Kinder Morgan’s chief commercial officer for natural gas pipelines.
The proposed project would deliver 2 billion cubic feet of gas a day through a 42-inch pipeline system, though Kinder Morgan said it could build a 48-inch pipeline instead if there was enough customer demand.
One major source of the natural gas is expected to be Apache’s Alpine High development in the southern Permian. Touted as one of the biggest discoveries of the decade, Alpine High is expected to produce plenty of oil and gas.
The new pipelines are critical to Apache’s plans to develop the play, in a remote area currently without pipelines, terminals and other infrastructure needed to move the petroleum to market.
Not many competitors are building gas pipelines that traverse Texas.
Competing projects include the planned Pecos Trail pipeline to Corpus Christi, which is proposed by Houston-based NAmerican Partners, a 3-year-old venture backed by private equity.
Also, Houston-based 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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