This quarter, construction is set to begin on the Gulf Coast Express Pipeline Project. The project is a joint endeavor between multiple members of the oil and gas pipeline industry, including Kinder Morgan Texas Pipeline LLC and DCP Midstream LP, in addition to an affiliation with Targa Resources Corp.
The Gulf Coast Express Pipeline Project
The Gulf Coat Express Pipeline is expected to contain an 82-mile, 36-inch OD pipeline in addition to 365 miles of 42-inch pipeline. The pipeline will run from the Waha Hub, which is located in the Permian basis near Coyanosa, Texas, to Agua Dulce, Texas. Project construction will also connect the Midland Lateral with the Gulf Coast Express mainline. The Midland Lateral consists of 50 miles of 36-inch pipeline, assisting gas processing facilities owned by Targa and Pioneer.
The project is primarily funded by Kinder Morgan, a company responsible for transporting a third of all of the gas consumed in the United States. The company anticipates the pipeline to be fully operational by October 2019, although they have admitted that a lack of regulatory approval may delay that timeline. In all, the project is expected to cost about $1.75 billion.
However, as mentioned, the pipeline is a joint venture between multiple members of the oil and gas pipeline industry, which breaks down as follows:
• Kinder, who will be responsible for building, owning, and operating 50% of the project
• DCP Midstream will hold a 25% equity interest
• Targa will hold a 25% equity interest
• Apache has the ability to purchase a 15% equity stake in the project at any time from Kinder Morgan
Apache senior vice president of midstream and marketing, Brian Freed, stated that his company’s participation would allow them to access the growing market demand on the Gulf Coast, as well as tap into Gulf Coast basis pricing.
Agreements In Place
According to the Oil & Gas Journal, the partners recently executed definitive joint venture agreements. Additionally, they also secured the required firm transportation agreements from their shippers.
Of the 1.92-bcf/d capacity planned for the project, only 15% remains unsubscribed. 85% of the bcf/d-capacity is committed under binding, long-term transportation agreements. The project’s partners anticipate that the entire project will be subscribed by the end of the quarter.
The project’s partners had originally announced that they reached 85% subscriptions at the end of 2017, which prompted them to reach their final investment decisions and move forward with the project. At that time, the president of Kinder Morgan’s natural gas mainstream unit Duane Kokinda said that the remaining capacity was being marketed to various shippers who had already expressed interest. He also said that the remaining subscriptions might be offered as part of a binding open season.
Furthermore, a number of shippers have committed to the project. Committed shipping companies include
• CDP Midstream
• Apache Corporation
• Pioneer Natural Resources Company
KMTP has also declared that they will commit volumes that are backed by a long-term purchase agreement. This agreement would lock in the pipeline’s equivalent transport fee.