Energy Transfer LP is moving forward with plans to build a $5.3 billion natural gas pipeline from the Permian Basin to markets in New Mexico and Arizona in what would be the biggest such US project in more than a decade.
The expansion of the company’s Transwestern Pipeline network that’s slated to begin operations in late 2029 will provide an outlet for Permian gas producers that have struggled with a dearth of shipping capacity.
The conduit is set to be the costliest since the $7.85 billion Mountain Valley Pipeline announced in 2014, said Oren Pilant, an analyst at East Daley Analytics. Energy Transfer is evaluating more than doubling the capacity of the project amid stronger-than-expected interest from prospective clients, Co-Chief Executive Officer Tom Long said during a conference call late Wednesday.
The project, which Energy Transfer said already has lined up shipping commitments from unidentified companies, may be a death knell for a Kinder Morgan Inc. proposal to build a conduit along a similar route.
Kinder Morgan fell 4.6%, making it one of the day’s worst performer in the S&P 500 Energy Index. Energy Transfer rose 0.7% to close at $17.86 in New York before surrendering some of those gains after the company posted disappointing quarterly profit, sales and cash-flow figures.
The boom in Permian Basin shale drilling that unleashed vast outflows of crude oil has also resulted in gluts of so-called associated gas so severe that local prices for the fuel have on occasion turned negative.
Energy Transfer’s project will involve more than 500 miles (800 kilometers) of 42-inch pipe with a capacity of 1.5 billion cubic feet per day, the company said in a statement Wednesday. It also will include nine compressor stations in Arizona, New Mexico and Texas.
Although the cost estimate for the Transwestern expansion comes to roughly $1 billion per 100 miles, it’s not at risk to the same sort of overruns that afflicted Mountain Valley because building across desert is easier and cheaper “compared to the mountainous Appalachia region, where an abundance of water crossings slowed down construction progress significantly,” Pilant said.
Source: By Emma Sanchez from Rigzone.com