Kinder Morgan Inc. put the Lockridge natural gas pipeline in Texas into service earlier this month, according to a filing late Sept. 28 with the U.S. Federal Energy Regulatory Commission (FERC).
Lockridge, along with several pipes under development or construction, is designed to remove gas from the Permian Basin in West Texas and eastern New Mexico where pipeline capacity has not kept up with the amount of gas associated with oil production in the region.
Oil output in the Permian was on track to continue hitting record highs before the coronavirus depressed economic activity and energy demand earlier this year. Crude output in the Permian peaked at 4.9 million barrels in March.
The lack of Permian pipeline space prompted some drillers to flare record amounts of gas before coronavirus demand destruction. That lack kept prices at the region's Waha hub well below the U.S. Henry Hub benchmark in Louisiana for years.
As recently as April, Waha prices were below zero. Henry Hub's premium over Waha averaged 89 cents per million British thermal units so far in 2020. That compares with $1.64 in 2019 and a five-year (2015-2019) average of 65 cents.
Henry Hub's premium over Waha has been declining since Kinder Morgan's 2-Bcf/d Gulf Coast Express pipe entered service in September 2019, allowing more low-cost Permian gas to flow to higher-cost markets along the U.S. Gulf Coast.
The 17-mile (27-km) Lockridge pipe is designed to deliver around 500 MMcf/d of gas.
One billion cubic feet is enough gas to fuel about five million U.S. homes for a day.
Other pipes expected to enter service over the next year or so in the Permian include Kinder Morgan's 2.1-Bcf/d Permian Highway in early 2021 and MPLX LP's 2-Bcf/d Whistler in late 2021.
Recommended Reading
The Need for Speed in Oil, Gas Operations
2024-03-22 - NobleAI uses “science-based AI” to improve operator decision making and speed up oil and gas developments.
E&P Highlights: April 15, 2024
2024-04-15 - Here’s a roundup of the latest E&P headlines, including an ultra-deepwater discovery and new contract awards.
TPH: Lower 48 to Shed Rigs Through 3Q Before Gas Plays Rebound
2024-03-13 - TPH&Co. analysis shows the Permian Basin will lose rigs near term, but as activity in gassy plays ticks up later this year, the Permian may be headed towards muted activity into 2025.
US Drillers Add Most Oil, Gas Rigs in a Week Since September
2024-03-15 - The oil and gas rig count, an early indicator of future output, rose by seven to 629 in the week to March 15.
US Drillers Add Most Oil Rigs in a Week Since November
2024-02-23 - The oil and gas rig count rose by five to 626 in the week to Feb. 23