Natural gas takeaway capacity from the US Gulf Coast region’s prolific Permian Basin increased by 550 MMcf/d with the in-service of an expansion of Kinder Morgan’s Permian Highway Pipeline.
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Kinder Morgan Texas Pipeline Permits
Kinder Morgan brought the expansion into service Dec.1, CEO Kimberly Dang said during an investor call Dec 7. The expansion uses compression to increase capacity on the line, which runs from Waha to Katy, Texas.
This is the second recent boost to Permian takeaway capacity. MPLX and Whitewater Midstream completed the brownfield 500 MMcf/d expansion of the Whistler pipeline at the end of September, MPLX said Oct. 31 in its third-quarter earnings release. The 2.5 MMcf/d greenfield Matterhorn Express Pipeline, also being developed by MPLX and Whitewater, is due online next year.
Dang said she does not see an immediate need for more greenfield takeaway projects out of the Permian.
“You’ve added over 1 Bcf/d of capacity in the fourth quarter, and then I think Matterhorn is coming on… in the back half of next year at some point,” Dang said. “So you’ve got capacity coming into the market now. That’s why we believe it’s the back half of the decade before you see the need for a brand-new greenfield pipe [in the Permian].”
Permian gas production hit new highs in November, reaching 19.8 Bcf/d on Nov. 8. But the balance between production and takeaway capacity remains tight, causing volatility at the Waha Hub. The cash price at Waha dropped to 64 cents /MMBtu for delivery Dec.7 amid constraints at the El Paso pipeline, while Permian production fell below 19 Bcf/d.
Dry Powder
Kinder Morgan does appear to have some dry powder available for investments, although Dang said the company is also eying “opportunistic” share repurchases. It expects to end 2024 with a debt-to-EBITDA ratio of 3.8, well below its target ceiling of 4.5. This headroom “is not burning a hole in our pocket,” Dang said. “But when you see nice opportunities, that gives us… the flexibility to go out and capitalize on those.”
Dang did not mention the mooted 570 MMcf/d expansion of Gulf Coast Express, which would also boost takeaway capacity from the Permian. The company announced an open season in May 2022, with an eye on a December 2023 in-service date, but has yet to take a final investment decision. In July 2023, then-CEO Steve Kean said the company was seeing “renewed interest” in the expansion.
The company will look at brownfield storage expansions, encouraged by a “significant” increase in storage rates, Dang said. It will add 6 Bcf/d of working gas capacity at its Markham facility in Texas in early 2024, and is “looking at opportunities across our network to do some storage expansions beyond that.” But it has no plans for greenfield storage expansions. “I don’t think the rates are sufficient enough, in our view at least, to add brand new greenfield capacity,” Dang said.
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