Permian Highway Pipeline LLC (PHP) sanctioned a 550 MMcf/d natural gas expansion project to boost capacity for the 2.1 Bcf/d West Texas to Gulf Coast system.

Permian Highway Pipeline

Using additional compression, the final investment decision (FID) would boost deliveries from the Waha area of West Texas to mainline connections near Houston and Gulf Coast markets. Pending required approvals, the targeted start up is Nov. 1, 2023.

The sponsors noted that one aim is to help supply liquefied natural gas (LNG) export projects on the Gulf Coast. LNG growth has become paramount to help supply overseas markets hit by Russian sanctions. PHP is jointly owned by Kinetik Holdings Inc. (53.3%), Kinder Morgan Inc. (26.7%) and ExxonMobil (20%). 

“This expansion couldn’t come at a more critical time, as it will foster future natural gas production growth in West Texas and provide several liquefaction facilities along the Texas Gulf Coast with more affordable, reliable supply,” said Kinetik CEO Jamie Welch. “In addition, approximately 30 of Kinetik’s customers will gain access to premium priced markets and transportation flow assurance, which is critical to minimizing flared volumes.”

“The project will alleviate transportation constraints out of the Permian Basin so as to further support meeting our domestic and global energy needs,” said Kinder’s Sital Mody, president of Natural Gas Midstream. 

A binding open season was completed in early May to increase capacity by 650 MMcf/d. No details were provided by the sponsors about whether the change was related to engineering or commercial issues. 

Tudor, Pickering, Holt & Co. (TPH) analysts noted that the open season to expand PHP had begun with a 325 MMcf/d anchor commitment in hand. 

“If the revised capacity is indicative of demand, it would dampen the odds of a successful FID for Kinder’s sister project on Gulf Coast Express,” the TPH analysts said. Expected in-service “also slid one month to the right…

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“While the announcement does not materially change our long-term Permian takeaway outlook, the slight reduction in scale incrementally tightens the early 2024 timeframe ahead of the 2.5 Bcf/d Matterhorn Express Pipeline in-service in 3Q2024.” Matterhorn is sponsored by Devon Energy Corp., EnLink Midstream LLC, MPLX LP and WhiteWater Midstream LLC.

The TPH analysts said, “All eyes now turn to Gulf Coast Express‘ proposed 570 MMcf/d compression expansion with a formal update expected in short order.”