ETP, Enterprise to expand west Texas gas service

Energy infrastructure companies Enterprise Products Partners and Energy Transfer Partners (ETP) are jointly developing two projects to expand natural gas takeaway capacity in the Permian basin of west Texas and southeastern New Mexico.

The companies during the second quarter will restore service on the idled 240-mile (386km), 160mn cf/d (5mn m³/d) Old Ocean gas pipeline that connects north Texas to Brazoria County on the Texas coast.

In addition, Enterprise and ETP are expanding the 800mn cf/d North Texas pipeline, another joint venture. That pipeline will move gas from the Delaware and Midland fields, which are part of the larger Permian basin, to the Old Ocean line by the 2018 fourth quarter. The North Texas pipeline carries gas to the Carthage hub in east Texas.

"Bringing the Old Ocean pipeline back into service will help meet the immediate demand for takeaway capacity from the growing Delaware basin and Midland basin," said Jim Teague, chief executive of Enterprise.

Infrastructure companies have been scrambling to keep up with growing gas production in the Permian basin, the biggest and busiest US oil field. Associated gas output has surged there as higher oil prices and low development costs bolster drilling. Some analysts have speculated that gas growth in the Permian could exhaust takeaway capacity in west Texas during the second half of this year.

Permian gas output in March reached about 9.8 Bcf/d, up by 27pc from a year earlier, according to the US Energy Information Administration. The Permian has become second largest gas-producing area in the US behind Appalachia, which is home to the Marcellus and Utica shales. The boom in Permian gas production has put downward pressure on prices in west Texas.

Spot prices at Waha, a bellwether for Permian supplies, were at an average 99¢/mmBtu discount to the Henry Hub in the past week, compared with a 39¢/mmBtu discount a year earlier. Producers usually sell gas at a discount to the Henry Hub price. An expanding discount can signal that production is growing.

Kinder Morgan is also developing pipelines to alleviate constraints in the Permian. The company plans to bring the 2 Bcf/d Gulf Coast Express on line in October 2019. The pipeline will ferry Permian supplies from Waha to the Agua Dulce hub near Corpus Christi, Texas. The company last month said it was in talks to develop a second project to meet additional demand from Permian producers.