Whatever It Takes, Part 2 - Permian Gas Takeaway Project Whistler Pipeline Moves Forward

Permian gas marketers were likely breathing a sigh of relief earlier this month when news came that the developers behind the Whistler Pipeline had made a final investment decision (FID) to proceed with the new 2.0-Bcf/d link between the Permian and South Texas. The project provides a crucial link in the gas takeaway picture for the Permian and makes it less likely that gas pipeline capacity constraints in the future will result in the negative prices that are plaguing the present-day gas markets in West Texas. Combined with the two other Permian greenfield gas pipelines that have taken FID — Kinder Morgan’s Gulf Coast Express (GCX) and Permian Highway Pipeline (PHP) — there is now ~6 Bcf/d of incremental Permian supply pointed at the Texas Gulf Coast over the next two years. That’s great news for Permian producers, as well as demand centers along the coast, where tremendous growth in LNG exports is under way. Today, we detail the third natural gas pipeline being built from the Permian to the Texas Gulf Coast.

We first discussed the Whistler Pipeline last summer in what turned out to be the Part 1 to today’s blog — now that the project has reached FID, it’s worth revisiting plans for the greenfield development, as some of the key details have changed slightly from the initial proposal put forth last summer. Before we do that, we’ll provide a quick recap of the latest in the Permian gas market. It would be fair to say that it has been a hectic few months for those navigating the tenuous market conditions in the region and closely watching for signs of relief. As we’ve highlighted in previous blogs earlier this year, the West Texas gas market has been laboring under severe, perpetual transportation constraints for moving gas to downstream destinations. Back in April, in Don’t Dream It’s Over, we outlined our view that as a result of these takeaway constraints, negative prices were likely to recur in the Permian until the next new chunk of pipeline capacity — Kinder’s GCX — comes online in October. That blog proved prescient as Permian gas trading in recent days has been defined by negative prices about as often as positive ones. That will all change when GCX starts up, as the incremental takeaway to the Texas Gulf Coast will buoy prices and shift the gas flows leaving the Permian (at least temporarily), as we outlined in Take Me To The Other Side. In our most recent Permian-focused gas blog, Sitting, Waiting, Wishing, we looked at the potential for an early start date for GCX, but also highlighted our view that a third pipeline, beyond GCX and Kinder’s PHP, would be needed long-term –– otherwise a sustained improvement in Permian gas prices was likely just wishful thinking. That’s where the Whistler Pipeline comes in.

The Whistler Pipeline Project

The Whistler project is relatively straightforward. MPLX, WhiteWater Midstream (backed by First Infrastructure Capital), and a joint venture between Stonepeak Infrastructure Partners and West Texas Gas (WTG) announced FID of the pipeline on June 3, after securing sufficient firm transportation agreements with shippers. Whistler (dashed green line in Figure 1) is being designed as a 42-inch-diameter pipeline capable of transporting approximately 2 Bcf/d of natural gas about 450 miles from the Waha Hub in the Permian to the Agua Dulce Hub in South Texas. Whistler will also include a 50-mile, 30-inch-diameter pipeline lateral into the Midland Basin, where it will interconnect with various processing plants and pipelines. At Waha, in the Delaware Basin, Whistler will have a direct interconnect with the 1.4-Bcf/d Agua Blanca Pipeline (solid blue line in Figure 1), a joint venture of WhiteWater, MPLX and Targa Resources (see It Was Good Living With You, (W)aha), as well as other pipelines. Agua Blanca currently interconnects with Kinder Morgan’s El Paso Pipeline (EPNG), Kinder’s Natural Gas Pipeline Co. of America (NGPL), ONEOK’s WesTex system and the Trans-Pecos header, a facility built by Mexico’s Comisión Federal de Electricidad (CFE). Agua Blanca also plans to have a future interconnect with GCX. The Whistler project’s partners expect to sell the remaining transport capacity on Whistler in the coming months. Whistler would begin operation in the third quarter of 2021, subject to the receipt of the necessary regulatory approvals.

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