OREANDA-NEWS. April 20, 2018. Natural gas producers and midstream companies are already in talks for a second pipeline to ship gas out of the Permian basin in west Texas as the ink dries on contracts for the first major expansion out of that rapidly developing formation.

Kinder Morgan's 2 Bcf/d (57mn m?/d) Gulf Coast Express pipeline is 94pc subscribed with contracts for the final 6pc of long-term capacity expected to close soon, executives for the midstream company said on an earnings call. The pipeline to carry gas from the Waha hub in west Texas to Agua Dulce in south Texas, is scheduled to begin service in October 2019.

The need for takeaway is so great in the Permian that some shippers have intentionally held back from subscribing on Gulf Coast Express in order to help underwrite the next large expansion, chief executive Steve Kean said.

"The fundamentals are strong and they support a second pipeline getting built," Kean said. "Gas is growing rapidly in the Permian and is low-cost — if not negative-cost — to produce for producers primarily aiming at crude and LNG out there."

Production in the Permian topped 9.83 Bcf/d in March, up by 27pc from a year earlier, according to an estimate from the US Energy Information Administration (EIA). The Permian is the second largest region for gas production in the US behind Appalachia, which is home to the gas-rich Marcellus and Utica shales. The EIA predicts Permian output will rise to nearly 10.3 Bcf/d next month.

Kinder Morgan is attempting to help debottleneck flows in the formation by pursuing multiple small expansions on its existing infrastructure in the region until the larger projects can come on line. The midstream company is considering small investments on El Paso Natural Gas and Natural Gas pipeline (NGPL) "as suppliers are hunting markets," Kean said.