Kinder’s Permian Highway Pipeline Has Some Permits Rescinded

April 24, 2020
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AEGIS View: If Permian Highway Pipeline is delayed, takers of Waha basis pricing should look at 1Q2021 hedges.

“The Hays County Commissioners Court voted Tuesday following executive session to immediately rescind the permits which allowed Kinder Morgan to cut through and drill underneath county roads. ”

San Marcos Record, 4/23/2020

Article Summary

  • Hays County, TX rescinded Kinder Morgan’s Permian Highway Pipeline’s (PHP) permits to drill under county roads
  • PHP is being constructed to transfer natural gas from the Permian basin to areas near Katy, TX, just west of Houston
  • Hays County expressed concern that PHP is damaging karst structures (permeable rock near the surface), which could lead to drilling fluids leaking into groundwater

Market Impact

There is no news yet whether these permits would cause a change to PHP’s construction timeline. The market is risk is that the project would be further delayed, which would remove some much-needed outbound capacity out of the Permian basin for 2021.  The market impact would be most felt by Waha and EP Permian natural gas basis points in West Texas.

AEGIS View

As we point out in our note Waha Prices Are Much Improved as Permian Oil Production Is Set to Fall, forward gas prices in the Permian basin are doing much better recently, rising to around a -50c discount to Henry Hub for much fo the forward curve. However, for those prices to hold in 2021, that market likely needs PHP to be online and providing full service.

If the pipe were to be delayed, we would expect most impact to 1Q2021 Waha and EP Permian basis.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

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