A deal by Enterprise Products Partners LP to snap up a Permian Basin sour gas midstream operator will accelerate the Houston giant’s strategy in the nation’s largest producing region by “at least three or four years,” a top executive said Wednesday.
Enterprise has agreed to pay $950 million to acquire Piñon Midstream LLC, a portfolio company of private equity Black Bay Energy Capital. The transaction is set to expand Enterprise’s services in New Mexico and Texas.
Enterprise’s Jim Teague, co-CEO of the general partner, said the Piñon assets “accelerate our entry into this region by at least three or four years. These assets are highly complementary to our midstream energy system and provide us an excellent entry point into the eastern flank of the Delaware Basin for us to expand our natural gas processing footprint.”
Piñon has 50 miles of natural gas gathering and redelivery pipelines and five three-stage compressor stations. It has 270 MMcf/d of existing hydrogen sulfide and carbon dioxide treating facilities.
By the second half of 2025, Piñon’s Delaware treating facilities are slated to be expanded to provide 450 MMcf/d through two acid gas injection (AGI) wells. As part of the transaction, Enterprise management is “evaluating locations for a third injection well” to support up to 750 MMcf/d of total treating capacity.
According to Enterprise, the Piñon business is supported by fee-based contracts with long-term acreage dedications, including minimum volume commitments. Additionally, Piñon’s monitoring, reporting and verification (MRV) plan to permanently sequester carbon dioxide for two AGI wells at the Dark Horse Treating Facility in Lea County, NM, was approved in June by the U.S. Environmental Protection Agency.
[Mexico Matters: Cross-border energy trade between the U.S. and Mexico was more than $66 billion in 2023. Understand this burgeoning trade flow – the projects, politics and natural gas prices – with NGI's Mexico Gas Price Index. Request a trial now.]
“This milestone MRV approval satisfies a major requirement” to qualify for a tax credit under the Biden administration’s Inflation Reduction Act (IRA), Enterprise noted. The IRA expanded and extended the Internal Revenue Service Section 45Q tax credit for carbon capture.
Enterprise estimated that the Piñon assets in the Delaware, mostly within New Mexico’s Lea County and in the West Texas county of Winkler, have more than 7,500 remaining well locations and access to “at least” six geologic production benches.
“Drilling activity in this area has generally been restricted due to the lack of sour natural gas treating and acid gas injection well capacity as well as the lengthy permitting process for acid gas injection wells, which can take up to two years,” Enterprise executives noted.
Piñon CEO Steven Green said the company’s aim was to “build the premier sour gas treatment and carbon sequestration asset in the market and, with the support of our producer clients, achieved our goal.”
This transaction is expected to be completed by year’s end.
