Kinder Morgan ups Permian gas line capacity

Kinder Morgan has boosted the total planned capacity for its Permian Highway Pipeline project by 100mn cf/d (2.8mn m³/d) to total 2.1 Bcf/d.

Demand for more takeaway capacity from the Permian basin in west Texas has been robust in recent months. The lack of takeaway combined with booming gas output pushed the Waha Oasis index into the negative in late November, at negative 24¢/mmBtu, a $4.57/mmBtu discount to the Henry Hub. Output from the Permian topped 12.2 Bcf/d in November, up by 30pc from a year earlier.

Kinder Morgan is currently developing two large-scale natural gas pipeline projects to serve Permian takeaway needs: the 2 Bcf/d Gulf Coast Express, and the now 2.1 Bcf/d Permian Highway pipeline.

The midstream company yesterday said it has all of the required rights-of-way for the $1.75bn Gulf Coast Express line, and has begun construction. That project is fully subscribed and on target for an October 2019 start-up.

The $2bn Permian Highway Express pipeline was fully subscribed prior to the increase of 100mn cf/d, which Kinder Morgan is now working to secure contracts for. Executives said they were able to eke out more capacity for the project by opting for larger compression units at its planned compressor stations.

"We thought if there is a market for it we can squeeze some more out," chief executive officer Steve Kean said on an earnings call.

On the potential for boosting flows on Gulf Coast Express Kean said "we will look for little pockets here and there but I would say we are largely tapped out there."

The company in its third quarter earnings call in October mentioned the possibility of a third pipeline out of the Permian. Executives did not give any updates on that possibility in yesterday's call, but said the company has added multiple new projects to its backlog. About half of the projects are for its intrastate system with the other half "supporting an LNG project that is yet to come," Kean said.

The company moved an additional 73mn cf/d of gas to Mexico during the fourth quarter of 2018, bringing its total shipments to that country over 3 Bcf/d.

Total gas transport volumes on Kinder Morgan's system during the quarter rose by 15pc on the year to 34.6 Bcf/d.