The Permian Basin’s growing natural gas volumes may provide the perfect aperitif to quench Mexico’s thirst, according to Kinder Morgan Inc.

The Houston-based pipeline and midstream giant’s natural gas segment makes up about 90% of the $900 million worth of projects that were added to the company’s backlog in the first quarter. On Monday, Kinder Morgan Texas Pipeline LLC, EagleClaw Midstream Ventures LLC and Apache Corp. said they have a letter of intent for the proposed Permian Highway Pipeline Project, a 42-inch diameter system that would run about 430 miles from the Permian to markets along the Texas coast and potentially into Mexico.

Mexico is a likely avenue for future expansion, Vice President Gregory Ruben, who oversees business development, said earlier this month.

Speaking at the 4th Mexico Gas Summit in San Antonio, TX, Ruben said some of Kinder’s future growth is based on Permian projections, where oil is surging, which in turn produces more associated gas. And the basin’s proximity to Mexico provides “connectivity opportunities,” he told the audience.

“We’re continuing to look for opportunities to expand our footprint into the marketplace.” Mexico’s energy reform has opened the door to opportunities, and the company now is looking for the “best connection at this point in time.”

From a footprint perspective, Kinder has holdings in many of the key U.S. gas basins, including in Appalachia, which “gives us quite a bit of opportunity to take advantage of the markets and the supply basins as they do develop over time.”

The interconnectivity with Mexico is a natural, Ruben said, as “we have been in partnership as far as delivering volumes into Mexico for quite some time” through legacy El Paso Natural Gas Pipeline Co., i.e. EPNG.

The company’s Mier-Monterrey gas pipeline during March was the second largest importer into Mexico at 490 MMcf/d. Kinder is considering an expansion of the pipeline, which now in “proposed status.”

The company today has “roughly 5.4 Bcf/d of interconnect capability and growing, across the border into Mexico,” Ruben said. And a “near-term” expansion is underway to add up to 200 MMcf/d to the 300 MMcf/d Border Pipeline.

Other projects also are in the works to move more gas south. During 1Q2018, contracts were secured to carry from the Permian about 1.2 Bcf of capacity via EPNG, with some supply destined for south of the border, Ruben said.

In addition, remaining capacity was taken for the proposed 2 Bcf/d Gulf Coast Express Pipeline (GCX) that also is designed to move gas supply from the Permian to South Texas — and beyond.

GCX is to date the only confirmed new pipeline in the works for Permian gas supply. Potential connectivity for GCX is seen at the Agua Dulce gas hub near Corpus Christi, where more volumes could be moved to Mexico and via liquefied natural gas exports.

Kinder’s Sierrita Gas Pipeline, with 200 MMcf/d, has been serving Mexico markets since 2014. Sierrita is being expanded by about 323 MMcf/d to move more to Sonora, where the Puerto Libertad Pipeline would transport supply to the Gulf of California. The expansion is set to be in service by 2020 and include a 15,900 hp compressor station.

“We’ve got quite a bit happening, and we’re continuing to work with market participants to grow that connectivity at the border with Mexico,” Ruben said.

Many of the future gas supply opportunities lead back to the Permian, as “we’re continuing to see upward adjustments in projections” by producers for wellhead supply.

Ruben offered Kinder scenarios for future Permian gas production. In the base case, it expects volumes to reach 16 Bcf/d in two years or so.

“That’s a huge amount of gas that’s got to try and find a home and try to find a place to go,” he said. “From an upside perspective, we could see 20 Bcf/d of wellhead production in the basin. So when you think about those numbers and you think about all the capacity that’s been built out, it does create some challenges…”

To get an idea of how well the Permian may handle future gas flows, the company’s team stacked up all of the expected demand from the western markets in Arizona and California, as well as Mexican consumption trends, to determine the “economic capacity” for future projects.

Kinder’s experts determined that moving gas north from the Permian was a nonstarter economically, as supply would run head on into gas-on-gas competition from Rockies Express Pipeline, which is carrying supple Appalachian gas west, along with growing volumes from Oklahoma’s stacked reservoirs in the Anadarko Basin and beyond.

Some unused capacity was seen in the analysis in western flows, and there was some unused capacity to the Mexican border.

”When you blend that in with capacity, it does create some compelling thoughts as far as what needs to happen to achieve balance within the basin,” Ruben said. “It’s a very compelling story.” GCX should begin transporting gas south in 2019, “and that gets us back into relative balance, but…based on how we see this growth should be moving forward from the basin,” more projects likely are needed to keep Permian gas in balance beyond 2020, he said.

“The good news is, if you are net buyer at Waha, there’s expected to be a lot of activity…”