After it gave up the Trans Mountain pipeline expansion in its native Canada, Kinder Morgan has bet on a certain win in the pipeline-strapped Permian. The company announced it has teamed up with Apache Corp and a Blackstone subsidiary on the construction of a US$2-billion, 2-billion-cu-ft gas pipeline project that will take natural gas from the Waha area to the Gulf Coast and to Mexico.

The Permian Highway Pipeline Project is scheduled to begin operation in late 2020, Kinder Morgan said, and could be expanded to accommodate more producers. It will be 50/50 owned by Kinder Morgan and Apache, while Blackstone’s EagleClaw has an option to buy up to 33 percent in the project and will, like Apache, commit substantial amounts of gas for shipment through the new pipeline.

The fact that Kinder Morgan is building a gas pipeline in an oil-dominated play may seem strange at first, but there are several oil pipeline projects in the making in the Permian, and these oil wells there produce huge amounts of associated gas that also needs to find its way to market, which justifies the company’s decision.

Of course, the bet is also much safer than Trans Mountain: Texas being oil country, and with an extensive pipeline network at that, the chances that the Canadian pipeline builder could face anything similar to the fierce opposition to Trans Mountain in its home country are pretty slim.

By the way, the PHP Project is not the only new gas pipeline project for Kinder Morgan in the Permian. Two months ago, the company started the construction of the Gulf Coast Express Project, which would cost around US$1.75 billion and have the capacity to carry up to 1.98 billion cu ft of gas from the Permian to Agua Dulce in Texas. The pipeline should be operational in late 2019 and has already been fully subscribed for the long term.

By Irina Slav for Oilprice.com

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