Wave of new Permian gas takeaway capacity projects nearing end: Kinder Morgan

A recent spree of new natural gas takeaway capacity announcements out of the Permian may be nearing an end, with a Kinder Morgan executive weighing in during a July 20 earnings call that the market is "pretty well-served until the latter part of the decade."

The sentiment may signal some doubts about the company's proposed Gulf Coast Express expansion project, which had an open season for commitments May 16-June 6, as well as the near-term possibility of Kinder Morgan proposing a new greenfield pipeline to move Permian gas out of the basin.

"With the projects—including ours—that have been [authorized] and are proceeding in the construction mode, there may be a near-term tightness, but once those projects go into service markets will be pretty well served until the latter part of the decade," said Tom Martin, Kinder Morgan's president of natural gas pipelines.

"The next projects that need [a final investment decision] will likely come in sometime in 2024, maybe 2025," Martin said.

The company authorized an FID June 29 to proceed with a 550 MMcf/d expansion on its Permian Highway system that would bolster deliveries from the Waha area to Katy, Texas, and other US Gulf Coast market areas. Fellow intrastate gas pipeline Whistler Pipeline has also decided to move forward on a 500 MMcf/d brownfield expansion project May 2, with the same consortium that built Whistler Pipeline also taking FID on a 2.5 Bcf/d greenfield interstate pipeline, Matterhorn Express, May 19.

LNG growth

While the company may not anticipate more expansions from the Permian in the immediate future, Kinder Morgan is still evaluating new investments in LNG transport capacity with a raft of planned LNG expansions set to come online in the near future. The company increased feedgas deliveries by 16% in the second quarter of 2022 compared with the previous year, to 5.8 million Dt/d, as worldwide gas tightness, prompted by the Russia-Ukraine war, yielded incremental demand from Europe.

"Depending on which expert you listen to, the projections are that between now in the next five years you're going to have 11-14 Bcf/d in growth in LNG [demand]," said Chairman Rich Kinder. "It's an incredible green shoot for Kinder Morgan."

Kinder Morgan is currently steering a $627 million expansion project that would add 2 million Dt/d in takeaway capacity on its Tennessee Gas Pipeline and Southern Natural Gas system, with additional feedgas aimed at Venture Global's Plaquemines LNG export project, which is under development in Louisiana.

Strong global demand for US LNG could also be the key to the GCX expansion project moving forward, with Martin saying that Kinder Morgan is also now in discussions with additional customers to add pockets of capacity, primarily to serve LNG feedgas demand.

Financial results

Kinder Morgan's Q2 results also included an upgraded financial forecast for full-year 2022. The company now expects to earn a net income of $2.65 billion for the year, up 5% from a $2.5 billion net income target shared earlier this year. Growth in the company's natural gas gathering business, especially in Texas and Louisiana, as well as "attractive" renewals in its gas transportation business, supported the sunnier outlook.

Kinder Morgan earned a net profit of $635 million in Q2 2022, up from a $757 million loss in the corresponding period of 2021.