Originally published for customers on August 18, 2023
What’s the issue?
When Matterhorn Express Pipeline announced its final investment decision, the project was slated for completion in the third quarter of 2024.
Why does it matter?
As the next greenfield pipeline planning to move gas from the Permian toward the Texas gulf coast, it will likely impact basin pricing when placed into service; therefore, any schedule changes can be significant.
What’s our view?
Our continuing viewpoint is that the third quarter targeted in-service date is a conservative one, and there is a much greater chance of the project being early rather than late.
When Matterhorn Express Pipeline announced its final investment decision, the project was slated for completion in the third quarter of 2024. As the next greenfield pipeline planning to move gas from the Permian toward the Texas gulf coast, it will likely impact basin pricing when placed into service; therefore, any schedule changes can be significant.
Our continuing viewpoint is that the third quarter targeted in-service date is a conservative one, and there is a much greater chance of the project being early rather than late.
Triangulating a Projected In-Service Date
During the last Permian buildout, we tracked the easement acquisition process which typically starts about 20 months before a project goes into service. We also tracked each pipeline’s applications to the Texas Railroad Commission for the authority to discharge the water from the required hydrostatic tests that a pipeline must complete once a segment of pipeline is buried and before it can be placed into service. Finally, we can also estimate the time it takes to construct a compressor station based on historical data. We use all three of these methods to determine what is a reasonable expectation for the in-service date of the Matterhorn Express Pipeline.
Matterhorn Express Pipeline
On May 19, 2022, WhiteWater Midstream, EnLink Midstream, Devon Energy and MPLX announced that they had reached a final investment decision to move forward with the construction of the Matterhorn Express Pipeline (Matterhorn). According to the announcement, Matterhorn would be a 42-inch pipeline running 490 miles from Waha, Texas to the Katy area near Houston, Texas and is designed to transport up to 2.5 billion cubic feet per day of natural gas. The owners announced that, pending receipt of customary regulatory and other approvals, the pipeline was expected to be in service in the third quarter of 2024.
Land Acquisition
The first financial commitment a pipeline developer typically needs to make is to acquire the rights of way for the pipeline itself. During the last Permian buildout we monitored this process for a number of different projects and created a curve for the “typical” project that runs from the first acquisition of land through to the actual in-service date. By monitoring the land acquisition progress of a proposed project, we can make our first estimate of an in-service date. Our most recent update of the land acquisition progress for Matterhorn shows it proceeding pretty much in line with the past projects we monitored.
Based on the project’s current progress it would appear that it could be planning an in-service date as early as May 1, 2024 — less than nine months from today.
Compressor Station Construction
Construction of the pipeline itself generally needs to wait until the land acquisition process is almost complete because a developer will not send out construction crews until it has contiguous rights of way for the work of the crews. However, compressor station construction can often start sooner because the land used for them is often purchased outright and so that acquisition can be completed much more quickly. Based on the air permits that Matterhorn has received, we know the physical location of the four compressor stations that the project intends to build, at least for initial operation. Satellite imagery we have seen for two of those locations shows that construction began at both stations by the end of April this year.
Using our data for FERC-regulated compression only projects that began construction since January 1, 2015, we know that it typically takes about eleven months for such projects to move from the start of construction to in-service.
Based on this data and the fact that we know Matterhorn began construction by the end of April this year, we would expect the project’s compressor stations to be operable by about May 1, 2024.
Hydrostatic Test Records
The final piece of data we collected during the last Permian buildout were applications filed with the Texas Railroad Commission to allow the pipeline to discharge the water used to pressure test the pipeline once it is constructed. These pressure tests are required by the safety regulations and are usually conducted on segments of the pipeline as construction progresses.
As seen above, the shortest time from first application to in-service was just 146 days. But typically, it takes closer to eight or nine months from the first application to in-service. To date we have seen no applications by Matterhorn, but that may not be surprising if we are not anticipating an in-service until May 1, 2024. If that May 1 date is to hold, however, we should begin to see some applications filed soon after Labor Day. Once these applications start, they will be our best indicator of the expected in-service date.
For now, we believe the project is targeting an in-service date a bit earlier than the announced date of the third quarter of 2024. Our current expectation is that the project could be in-service somewhere between May 1 and the end of the second quarter. Thus there appears to be a greater likelihood that the project beats its projected in-service date than there is that the project will be delayed.