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NGPL expansion in Permian clears environmental hurdle at FERC

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NGPL expansion in Permian clears environmental hurdle at FERC

A proposed pipeline expansion project connecting Natural Gas Pipeline Co. of America LLC's system to the Waha Hub in the Permian Basin of West Texas cleared a key regulatory hurdle with a positive environmental assessment from the Federal Energy Regulatory Commission.

In its May 31 report, agency staff said the 17-mile, 30-inch-diameter pipe would not pose a significant environmental impact, contingent on implementation of recommended mitigation measures. The Lockridge Extension would provide up to 500,000 Dth/d of incremental southbound capacity from Waha to NGPL's Trans-Pecos Pipeline, where it would target export demand from Mexico.

The FERC document adhered to the agency's scheduled completion date, a pattern the agency has followed with most natural gas projects in recent months. However, a split at FERC over greenhouse gas considerations has seemed to slow the issuing of at least a handful of pipeline certificate orders this year.

The Lockridge expansion is one of three projects being undertaken by NGPL parent company Kinder Morgan Inc. as the midstream developer targets growing demand for new production takeaway capacity from the Permian. In recent months, the significance of Kinder Morgan's expansion projects, which include the 2-Bcf/d Gulf Coast Express project and the 2.1-Bcf/d Permian Highway pipeline, has grown as strong gas production in West Texas has continued to test the limits of existing midstream capacity.

Near the end of May, gas prices in the Permian Basin turned negative again, briefly falling to levels under -$3/MMBtu, S&P Global Platts data showed. The negative prices came as a pipeline force majeure cut takeaway capacity just as production levels reached their highest since early in May.

From late March to early April, Permian gas hubs experimented with negative pricing as basin production surged to a record-high 9.4 Bcf/d and a series of forces majeure cut takeaway capacity. According to S&P Global Platts Analytics, Permian output becomes fully constrained around 9.4 Bcf/d as it absorbs the existing 8.7 Bcf/d in midstream capacity and approximately 700 MMcf/d in local demand.

The Lockridge Extension, which has an in-service date in the fourth quarter of 2020, would provide long-term service to two shippers: Lucid Energy Delaware LLC at 460,000 Dth/d and EOG Resources Inc. at 40,000 Dth/d. (FERC docket CP19-52)

The pipeline will create an additional outlet for Permian gas, connecting NGPL's existing system to the Waha Hub and transporting it to an interconnection with the Trans Pecos pipeline in Pecos County, Texas. Trans Peco pipeline is designed to deliver approximately 1.4 Bcf/d to a cross-border interconnect with a pipeline near Ojinaga in the state of Chihuahua, Mexico, fulfilling firm transportation service agreements with Mexican state-owned power generator Comisión Federal de Electricidad to help supplement growing demand.

Before the Lockridge expansion enters service, Kinder Morgan's Gulf Coast Express project, scheduled to start up by October, will help to ease gas transportation constraints and weak prices in the Permian Basin. Kinder Morgan's Permian Highway pipeline will begin service by the fourth quarter of 2020, around the same time as the Lockridge Extension.

J. Robinson, Maya Weber and Emmanuel Corral are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.