Matterhorn Pipeline Update -- April 17, 2024

Locator: 47021PIPELINES.

Link to RBN Energy.

Permian E&Ps want to increase their crude oil production, but they are hemmed in — and at least a tad hesitant. As producers in West Texas and southeastern New Mexico know all too well, crude production growth can only happen if there is sufficient pipeline capacity in place to move not only the oil they extract, but also the massive volumes of associated gas that emerge with it. As we discussed recently in Come Dancing, takeaway capacity for gas is once again at the knife’s edge, and there really are no good alternatives to piping that incremental gas to market — for most producers, flaring at scale is no longer an acceptable. Luckily, there’s at least one gas-takeaway fix in the short-term: The greenfield, 2.5-Bcf/d Matterhorn Express gas pipeline will come online later this year.

But while Matterhorn will help, it’s likely to fill up quickly, meaning even more gas takeaway will be needed to keep crude production growing through the next decade. That may include the expansion of the Gulf Coast Express (GCX) system as well as installing some new pipes (See Come Dancing for our projections of new gas pipe capacity). Assuming that new gas pipeline capacity out of the Permian is added as needed, crude oil production growth in the basin will eventually drive the need for more takeaway capacity, especially to major Gulf Coast oil hubs. That growth could also drive the development of one or more of the new deepwater export terminals being planned off the Texas coast, which could spur additional pipeline capacity to feed those terminals.

Enbridge again:

Two companies are already stepping up their efforts to boost takeaway capacity, targeting their Permian-to-Corpus Christi pipe assets. Enbridge is planning to expand its 900-Mb/d Gray Oak crude oil pipeline by 120 Mb/d (see graphic at link). 

The company said the new capacity will be added in two phases that will conclude in early 2026. The current plan is notably less than the original announcement which was to add 200 Mb/d. That reduction could indicate that producers and shippers, whose commitments are critical in getting new pipeline capacity built, for one reason or another, are not yet compelled to sign up for capacity. 

In addition, it is our understanding that EPIC Midstream wants to add 300 Mb/d of new capacity to its namesake crude system (see graphic at link), although there are no timelines for it.

More on the Matterhorn natural gas pipeline here:

Let's see if my "rule of thumb" holds: my estimated cost -- $750 million. Unable to find FID cost.