I discussed last week how funding for a major new pipeline is boosting prospects for natgas exports into Mexico. And news this week suggests that another big U.S. midstream player is taking notice of the opportunity.
That’s ONEOK Partners. Specialist operator of a 36,000-mile pipeline network for natural gas and liquids across the southern U.S.
This week, ONEOK said it has struck a joint-venture deal to add one more pipeline project to its portfolio — a 200-mile line to carry natural gas from the Permian Basin of Texas to the Mexican border.
The pipeline is being advanced in partnership with Mexican midstream operator Fermaca Infrastructure. Owner of the Tarahumara gas pipeline, which spans northern Mexico to the border crossing near the town of San Elizario, Texas.
The planned ONEOK/Fermaca pipeline will connect Texas natgas to Fermaca’s Mexican network. And a lot of it — with the line expected to carry up to 570 million cubic feet per day of natgas for export into Mexican markets.
That would make the ONEOK/Fermaca project the second-largest export pipeline on the U.S. side of the border. Adding significantly to overall takeaway capacity from southern U.S. natural gas plays.
Importantly, ONEOK said that all of the initial design capacity for the pipeline has already been contracted for delivery to Mexico’s national electric utility, Comision Federal de Electricidad, and a subsidiary of Fermaca. With those parties committing to take-or-pay purchase contracts for a period of 25 years.
And it won’t take long for the project to start contributing to U.S. natgas demand. With the first phase of 170 million cubic feet per day expected to be operational in the first quarter of 2016. With capacity then expected to jump to 570 million cubic feet per day by the first quarter of 2017.
All of which is another signal that exports to Mexico are becoming a big part of the U.S. natural gas story. Which may put pressure on supply and prices, sooner than many observers are anticipating. Watch the supply-demand figures over the coming months as more export pipelines come online.
Here’s to finding a market,
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