Kinder Morgan plans Permian natural gas pipeline

Kinder Morgan is planning the next big pipeline project coming from the booming Permian Basin, but one that would transport natural gas, rather than oil.

The pipeline, which would run from Waha in West Texas to the Agua Dulce near Corpus Christi, where it could be consumed locally by power generators and petrochemical plants, piped to Mexico or exported overseas as liquefied natural gas.

Several other companies are building Permian pipelines, but they’re mostly crude oil projects. Houston-based Enterprise Products Partners, for instance, is building the Midland-to-Sealy pipeline to tap into Houston pipeline, refining and storage networks, while Houston’s Plains All American Pipeline is expanding its BridgeTex Pipeline from West Texas to Houston.

Most drillers in the Permian are seeking oil, but they also produce natural gas and natural gas liquids, such as ethane, as byproducts. Kinder Morgan’s 430-mile, 42-inch pipeline would be completed in late 2019 and looks to capitalize on that increased production. Kinder Morgan did not disclose the cost of the project.

The Texas power grid increasingly relies on natural gas for electricity generation, while the rapidly growing petrochemical industry needs natural gas liquids as feedstock to make chemicals and plastics. Likewise, new Gulf Coast liquefied natural gas projects need gas to convert into LNG for exporting. Finally, Mexico is also using Texas shale gas to generate electricity.

The proposed pipeline could tap into Kinder Morgan’s existing Permian-area pipeline network, as well as Dallas-based Energy Transfer Partners’ new Trans-Pecos Pipeline, which will ship gas from West Texas to Mexico. Canadian pipeline giants Enbridge and Trans-Canada are all building gas pipelines into Mexico.

Kinder Morgan said it is seeking customers for the pipeline through April 20 before moving forward with construction.

In an analyst note, Brandon Blossman, of Tudor, Pickering, Holt & Co., said the project shows the willingness of pipelines companies to solve potential bottleneck problems for producers extracting more gas than they can move from the popular Permian.