Three major players in the oil industry, Kinder Morgan Texas, EagleClaw Midstream Ventures and Apache Corporation have signed a letter of intent for the development of the $2 billion Permian Highway Pipeline project.  Apache photo.

Permian Highway Pipeline to ship natural gas to Texas Gulf Coast

Kinder Morgan Texas Pipeline LLC, EagleClaw Midstream Ventures LLC, a portfolio company of Blackstone Energy Partners, and Apache Corporation have signed a letter of intent for the development of the proposed Permian Highway Pipeline project.

The $2 billion pipeline will ship up to 2.0 billion cubic feet per day (Bcf/d) of natural gas from the Permian basin to the Texas Gulf Coast.

“The PHP Project is structured to provide unrivalled market optionality for Permian producers,” said Sital Mody, Chief Commercial Officer of Kinder Morgan Natural Gas Midstream.

The 430 mile, long 42-inch pipeline, will start in the Waha, Texas area and terminate in the Texas Gulf Coast, and ship 2.0 billion cubic feet per day (Bcf/d) of natural gas.

Currently, many Permian producers are struggling to get their crude and natural gas to market because pipeline capacity is close to full.  Kinder Morgan says that because a number of producers have expressed interest in using the PHP, they are considering the economic and hydraulic feasibility of a 48-inch pipeline.

Bob Milam, CEO of EagleClaw said “We have evaluated many different pipeline options over the last 18 months, and we believe that this project has the best and broadest end-market options that will maximize overall net-back value and end-market flexibility for our customers”.

Natural gas supply will be sourced into the PHP Project from multiple locations, including KMI’s, EagleClaw’s and Apache’s existing systems in the Permian Basin, with additional interconnections to both intrastate and interstate pipeline systems in the Waha area.

“By contracting for space on KMI’s extensive intrastate systems, the project will offer seamless nominations to the Katy and Agua Dulce market hubs; pipeline headers into LNG export facilities on the Texas Gulf Coast; multiple pipelines delivering gas into Mexico, including Valley Crossing, NET Mexico, and KMI’s Border and Monterrey pipelines; and numerous other intrastate and interstate pipelines”, said Mody.

Kinder Morgan Texas Pipeline and EagleClaw will be the initial 50-50 partners and Apache will have an option to buy up to 33 per cent equity in the project from KMTP and EagleClaw.  Apache has been jointly developing the proposed project.

Apache and EagleClaw will be significant shippers on the proposed pipeline, with Apache planning to commit up to 500,000 dekatherms per day. KMTP will build and operate the pipeline.

“The estimated in-service date of the PHP Project also coincides with growth and scale of our production forecast for Alpine High as well as other Permian production”, said Brian Freed, Apache senior vice president, Midstream and Marketing.

The pipeline, subject to execution of definitive agreement and the receipt of construction permits, is expected to be online in late 2020.