NET Mexico

Constructing greenfield pipelines is never easy — just ask any midstream developer you know — but building them across the breadth of Texas comes with its own unique challenges. There’s distance, for starters, and today’s massive associated gas growth in the Permian Basin is occurring more than 400 miles from the closest demand along the Gulf Coast. That makes the pipelines relatively expensive at somewhere near $2 billion a copy. Integrating Permian supply with Gulf Coast demand also requires a big network of pipelines along the coast, as the demand is spread out from Louisiana to Mexico. Few midstream companies have such a network. Kinder Morgan does, one reason why, in our view, the Gulf Coast Express project was the first — and to-date the only — greenfield project from the Permian to proceed with a final investment decision. In the race to be the next Permian natural gas relief valve pipeline, the same hurdles will have to be overcome. On Friday, news came that a group of four companies is planning the Whistler Pipeline, and a closer look at the project reveals it may be capable of meeting the challenges needed to make it a serious player in the Permian pipeline race. Today, we look at the details of the latest Permian natural gas pipeline project.

Mexico’s power sector is one of three major demand centers U.S. natural gas producers and pipeline projects are targeting, the other two being the U.S. power sector and LNG exports. U.S. natural gas exports to Mexico are up 20% year-on-year in 2016 to date to nearly 3.5 Bcf/d––more than double the export volume five years ago––and are poised to soar past 6 Bcf/d by the end of the decade. Mexico’s energy operators are on a tear adding new natural gas-fired power generation capacity and building a sprawling network of natural gas transportation capacity. But delivering increasing volumes of U.S. natural gas to Mexico will require substantial changes on the U.S. side as well, particularly in Texas. Today, we continue our look at plans for adding pipeline export capacity along the Texas-Mexico border.