FORT WORTH, Texas — Another major natural gas pipeline out of the Permian Basin will be needed sooner than later, said the CEO of one of the larger midstream companies in the Delaware Basin.
However, Jamie Welch, Kinetik Midstream’s president and CEO, added that planning the route of that next line would be a complicated matter.
“You get to one very interesting question — ‘where do you go?’” Welch said at the Hart Energy SUPER DUG Conference & Expo.
The Matterhorn Express Pipeline, expected to begin service in the second half of the year, adds 2.5 Bcf/d of natural gas capacity from the Permian Basin and terminates in Southeast Texas, close to the Houston area. Welch described the project as a “band-aid” for the growing needs of gas takeaway from the Midland and Delaware basins.
No other pipeline projects or expansions have received a final investment decision. Welch said a 500 MMcf/d expansion of the Gulf Coast Express Pipeline (GCX), which until recently Kinetik had an interest in, is likely to be the “next domino to fall.”
After that, midstream companies could face a problem in deciding which route is the best to take.
The facilities at Corpus Christi, Texas, are currently considered the best destination for Permian crude because of the relatively short path from the Permian, as opposed to the Houston area and further east. However, the lines that terminate at Corpus Christi have been operating at or near capacity for much of 2024.
“Do you start thinking about laying it over in Beaumont [,Texas]?” Welch asked, pointing to a port city about 60 miles east of Houston. “Ladies and gentlemen, that’s like 700 miles.”
Besides the proposed GCX expansion, three other natural pipelines out of the Permian are under consideration. Two of them would terminate either at Beaumont or as far as Southwest Louisiana. The third, Warrior, would connect to a pipeline network currently in place in North Texas.
The longer the pipeline is, the higher the costs in steel, labor, right-of-way and compression. Pipeline builders then have to make up the costs to investors through tariff rates applied to producers.
“The shipper’s going to look at you and say, ‘That’s great — I’m not signing up for that, but let me know how it goes,’” Welch said.
Kinetik’s focus has been on the Delaware Basin. The company made news earlier in May when it reached an agreement to acquire Durango Permian in a deal valued at $1.3 billion. As part of the agreement, Kinetik agreed to sell its interest in the GCX pipeline.
Following completion of the deal, Kinetik will own and operate over 2.4 Bcf/d of processing capacity in the Delaware and approximately 4,600 miles of pipelines across eight Texas counties.
Welch said Kinetik took a detailed look at Durango’s assets and operations before going forward with the deal.
The northern Delaware area is seeing a lot of activity, Welch said, giving Kinetik a lot of opportunity to capitalize on.
Most of the new development is from small independents, and Welch said the Durango acquisition brought along more than 60 new customers.
“The more we peeled back the onion on Durango, the more we loved it,” he said.