FERC approves new natural gas pipeline in Permian

Federal regulators have signed off on Kinder Morgan’s planned Lockridge natural gas pipeline in the Permian Basin in West Texas.

The U.S. Federal Energy Regulatory Commission on Wednesday approved the line that is designed to help remove natural gas from the Permian basin in West Texas and eastern New Mexico. The basin has seen record oil production but pipeline capacity has failed to keep up with the amount of gas that’s linked to the wells.

That lack of pipeline space has prompted some drillers to flare record amounts of gas in the Permian and caused prices at the region’s Waha hub to remain well below the U.S. Henry Hub benchmark in Louisiana for years.

At times Waha prices even turned negative in 2019. Henry Hub’s premium over Waha averaged $1.42 per million British thermal units so far in 2020. That compares with $1.64 in 2019 and a five-year (2015-2019) average of 65 cents.

Henry Hub’s premium over Waha has been declining since Kinder Morgan’s 2.0-bcfd Gulf Coast Express pipe entered service in September, allowing more low-cost Permian gas to flow to higher-cost markets along the U.S. Gulf Coast and Mexico.

Kinder Morgan’s Natural Gas Pipeline Co of America LLC unit will build and operate the 17-mile Lockridge pipe, which is designed to deliver 0.5 billion cubic feet per day of gas.

One billion cubic feet is enough gas to fuel about five million U.S. homes for a day. Kinder Morgan has said it expects the Lockridge pipeline to be in service later in the year.

Source: Reuters