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Kinder: Permian gas line interest significant

25 Apr 2017, 6.19 pm GMT

Kinder: Permian gas line interest significant

Houston, 25 April (Argus) — Bids for capacity on Kinder Morgan's proposed Gulf Coast Express pipeline significantly exceeded the planned capacity 1.7 Bcf/d (48mn m³/d), potentially leading to a larger project that would connect west Texas natural gas supplies to the Gulf coast.

The US infrastructure company is still evaluating the bids received during a non-binding open season that closed late last week. Based on the level of interest, Kinder Morgan could increase the size of the pipeline, the company told Argus.

Kinder Morgan is jointly developing the Gulf Coast Express pipeline with DCP Midstream, a leading gas marketer in the Permian basin and anchor shipper. The project will allow supplies from the Permian, the second largest US field, to meet growing demand on the Texas coast.

Output from the Permian basin has been in the spotlight as producers ramp up drilling there to take advantage of low development costs and higher energy prices. Waha gas prices so far this month have traded at an average 32¢/mmBtu discount to the Henry Hub, compared with 17¢/mmBtu a year earlier. That expanding discount is a sign of growing production.

The 430-mile (692km) Gulf Coast Express will stretch from the Waha hub area in West Texas to the Agua Dulce hub near Corpus Christi. Gas at Agua Dulce could feed into multiple intrastate pipelines, to Cheniere Energy's planned Corpus Christi LNG project and to lines serving growing demand in Mexico.

Kinder Morgan has also launched a binding open season on the El Paso Natural Gas pipeline system that would carry supplies from west Texas and southeastern New Mexico into the Waha hub. El Paso primarily moves west Texas gas to markets farther west, but the project would boost capacity heading in the other direction, giving producers access to pipeline connections at Waha.

The company is offering 150mn cf/d of firm capacity on El Paso but could expand system capacity into Waha by as much as 900mn cf/d, depending on shipper interest. The open season on the El Paso expansion is scheduled to close today. Kinder Morgan could not provide any details yet on the level of shipper interest.

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