Kinder Morgan Inc.’s hotly contested Permian Highway Pipeline (PHP) is fully operational, moving associated gas volumes through a 430-mile pipeline from Waha in West Texas to Katy, outside of Houston, with connections to the Gulf Coast and Mexico markets.
PHP was mechanically complete on Nov. 1, and the 2.1 Bcf/d conduit is expected to be fully in service in the early first quarter of 2021.
The pipeline is Kinder’s second out of the Permian. Gulf Coast Express went into service in September 2019. A third Permian pipeline was in the works before the Covid-19 pandemic and the historic oil market downturn dramatically altered the energy landscape.
On the company’s third quarter 2020 earnings call, CEO Steven Kean said that although associated gas production in the Permian is expected to remain slow given the weak oil price environment, PHP’s in-service would not be to the detriment of Kinder’s other gas systems in the basin since most of the existing takeaway is under reservation, fee-based contracts.
RBN Energy LLC analyst Jason Ferguson said Permian production has generally recovered from the dip it experienced this summer after the unprecedented decline in oil prices, hovering in the 11.5-12.0 Bcf/d range “for some time.”
Meanwhile, Permian outflows to the Midcontinent plunged last week as PHP ramped up. That trend, he told NGI, would likely continue through next year as PHP continues to ramp up and Whistler Pipeline comes online.
Cash markets on Monday appeared to be pricing in the pipeline in-service, which occurred as winter weather remained absent from forecasts. Waha next-day gas was trading around $2.150/MMBtu, off less than 10 cents from Friday’s level, according to NGI’s midday price data. By comparison, other Texas market hubs were trading between 10.0 and 20.0 cents lower day/day.
Kinder was able to bring PHP online slightly ahead of its adjusted schedule despite having to reroute a small portion of the pipeline around a river crossing. The pipeline has been plagued with litigation since it was launched, with the ongoing legal battles cited in management’s decision to push back the targeted startup to early 2021, from this past October.
Kinder Morgan Texas Pipeline LLC (KMTP), EagleClaw Midstream Ventures LLC and Altus Midstream LP each hold an ownership interest of around 26.7%, and an affiliate of an anchor shipper has a 20% interest. Besides EagleClaw, shippers include Apache Corp. and XTO Energy Inc., a subsidiary of ExxonMobil Corp. KMTP is building and would operate the pipeline.
