The Daley Note

Long-awaited Project FID Adds to Permian Momentum

Written by Maria Paz Urdaneta | Nov 6, 2024 4:41:31 PM

Kinder Morgan (KMI) and partners will move forward with a long-awaited expansion of Gulf Coast Express Pipeline (GCX), adding more eastbound takeaway to meet gas production growth from the Permian Basin.

KMI announced the decision on GGX as part of its 3Q24 earnings. The GCX partners (KMI, ArcLight Capital Partners, and Phillips 66 (PSX)) reached a final investment decision (FID) on August 30 after obtaining binding long-term agreements, KMI said.

East Daley Analytics includes the GCX expansion in the latest Permian Basin Supply & Demand Report. The estimated $455MM project will add new compression on the 500-mile pipe, lifting capacity by 570 MMcf/d from Waha to the Agua Dulce hub in South Texas. Start-up is targeted for mid-2026.

Among recently built Permian natural gas pipelines to South Texas, GCX was the last to have an expansion opportunity still on the table. KMI launched the open season in May 2022, and the project had languished while competitors Whistler and Permian Highway Pipeline completed similar compression expansions. The project will take GCX’s total capacity to 2.57 Bcf/d.

Permian natural gas production is growing rapidly. In Energy Data Studio, East Daley projects supply to grow 1.7 Bcf/d next year, increasing from an average of 17.2 Bcf/d in 2024 to 18.9 Bcf/d in ‘25. The new eastbound pipe capacity is likely to fill quickly from new production growth and some rerouted northbound volumes (see figure from the Permian S&D Report).

The GCX expansion adds to a wave of recent projects that will expand Permian takeaway to the Texas Gulf Coast. The 2.5 Bcf/d Matterhorn Express Pipeline began delivering gas on October 1 to Katy, and a WhiteWater Midstream-led group also has taken FID on the 2.5 Bcf/d Blackcomb Pipeline.

Permian operators will welcome the latest announcement from the GCX owners. Matterhorn has filled rapidly, and while helping prices at the margin, Permian gas has continued to frequently trade for negative prices due to other pipeline maintenance. The factors all point to a need for more expansions to accommodate Permian supply growth. – Maria Paz Urdaneta Tickers: KMI, PSX.

 

Dirty Little Secrets 2025: Commodity Ties Create an Abundance of Opportunity - 2-Part Series

Part 1 - Don’t Balk at the Bakken. Part 1 of this exclusive series will explore the Bakken as an example of how to view the entire U.S. energy value chain. The commodity market may be out of step, but equity markets are on target. Relying on just one could be a costly mistake. If you can anticipate what’s unfolding in the Bakken, you'll be positioned to profit across the US energy sector.  Join East Daley November 6 at 10 am MST. Register here to join us.

Sign Up for the NGL Insider

East Daley NGL Insider provides weekly updates on the US NGLs market including supply and demand fundamentals, basin-level views, and analysis of market constraints and infrastructure proposals. We explore sub-basin dynamics and provide market insights on NGL flows, infrastructure, and purity products. Sign up now for the NGL Insider

The Daley Note

Subscribe to The Daley Note (TDN) for midstream insights delivered daily to your inbox. The Daley Note covers news, commodity prices, security prices and EDA research likely to affect markets in the short term.