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NGPL Permian expansion clears environmental hurdle at FERC

Highlights

Project provides up to 500,000 Dt/d of capacity

Q4 2020 in-service date targeted

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

In its report, the agency said that the roughly 17-mile, 30-inch diameter pipe would not pose a significant environmental impact, contingent on implementation of its recommended mitigation measures.

The Lockridge Extension Pipeline would provide up to 500,000 Dt/d of incremental southbound capacity from Waha to NGPL's Trans-Pecos Pipeline, where it would target export demand from Mexico.

The May 31 filing from FERC adheres to the agency's scheduled completion date for the environmental assessment, a pattern that the agency has followed with most natural gas projects in recent months.

Recently, though, a split at FERC over greenhouse gas considerations seems to have slowed the issuing of at least a handful of pipeline certificate orders this year.

IMPACT

The Lockridge expansion is one of three projects being undertaken by NGPL parent company Kinder Morgan as the midstream developer targets growing demand for new production takeaway capacity from the Permian.

In recent months the significance of Kinder's expansion projects, which include the 2 Bcf/d Gulf Coast Express and the 2.1 Bcf/d Permian Highway Pipeline, has grown as strong natural gas production in West Texas has continued to test the limits of existing midstream capacity.

Earlier this week, gas prices in the Permian Basin turned negative again, briefly falling to levels under minus-$3/MMBtu, S&P Global Platts data shows. Negative prices came as a pipeline force majeure cut takeaway capacity, just as production levels reached their highest since earlier this month.

From late-March to early April, Permian gas hubs experimented with negative pricing as in-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.

LOCKRIDGE PROJECT

The Lockridge Extension, which is targeting an in-service date by fourth-quarter 2020, would provide long-term service to two shippers including Lucid Energy Delaware (460,000 Dt/d) and EOG Resources (40,000 Dt/d).

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 Trans Pecos Pipeline in Pecos County.

TPP is designed to deliver approximately 1.4 Bcf/d to a crossborder interconnect with a pipeline near Ojinaga in the state of Chihuahua, Mexico, fulfilling firm transportation service agreements made with Mexico's state-owned power generator CFE to help supplement its growing demand.

Before Kinder's Lockridge expansion enters service, the developer's 2 Bcf/d Gulf Coast Express project, scheduled to start up by October, will help to ease gas production constrains and weak prices in the Permian Basin. Kinder's second major project, the 2.1 Bcf/d Permian Highway Pipeline, will begin service by fourth-quarter 2020, around the same time the Lockridge Extension starts up.

-- J. Robinson, Maya Weber, Emmanuel Corral, newsdesk@spglobal.com

-- Edited by Jasmin Melvin, newsdesk@spglobal.com