Leaders of midstream company Kinder Morgan said another natural gas pipeline out of the Permian Basin is necessary and that the firm is working towards initiating a project.

Executives discussed the new line project during the company’s first-quarter earnings call on April 17.

“We see a need for another pipe,” said Sital Mody, president of natural gas pipelines for Kinder Morgan. “We don’t have anything to announce today, but we continue to try and work on trying to commercialize another pipe. [We’re] still having discussions with customers along those fronts, but nothing to report this afternoon.”

The project came up during a discussion of prices at the Waha Hub, a natural gas pricing point located near Pecos, Texas. Prices at the hub have dipped into negative territory for weeks and were trading at -$2.40 per MMbtu on April 17, according to investment banking firm Piper Sandler.

At the same time, natural gas production in the Permian Basin is expected to increase by about 140 MMcf/d to a record 25.24 Bcf/d average in May, according to estimates from the U.S. Energy Information Administration.

The Permian produces associated natural gas as part of the crude extraction process. High crude prices mean that many producers are willing to deal with excess natural gas, even if they have to pay other companies to take it off their hands.

Mody’s statement during the earnings call is a more aggressive stance compared to what the company took last quarter, when CEO Kim Dang said the company was only interested in a new pipeline in the “back half of the decade.” At the time, a new project was still far enough down the timeline that there had not been much conversation about it.

Kinder Morgan added an additional 550 MMcf/d of capacity on its Permian Highway Pipeline in December, which runs from the Waha Hub to Houston.

For now, the company sees the negative prices at Waha as a short-term phenomenon driven primarily by the weather, Mody said. However, natural gas production in the region is expected to continue to climb as crude prices drive production.

Gas egress capacity out of the region is expected to get a major boost when the Matterhorn Express Pipeline, a joint venture between WhiteWater Midstream, Devon Energy, Marathon Petroleum and EnLink Midstream, comes online in 2024. The line has 2.5 Bcf/d capacity and will transport gas from West Texas to the Houston area.

Kinder Morgan Executive Chairman Rich Kinder opened the earnings call with a bullish speech on the future demand for natural gas, citing the expected massive growth in the LNG export market and the materializing need for more U.S. data centers.

Kinder referred to a recent market estimate by wholesale power market operator PJM Interconnection that the Northeast and Midwest U.S. would need to add 10 gigawatts to the electrical grid by 2029.

“Now to put that in perspective, 10 gigawatts is about twice the power demand in New York City on a typical day,” Kinder said. “The overriding question is, ‘How to handle this increased demand?’” 

Natural gas-driven generators are the most logical new supply, he said, as solar and wind have yet to prove their reliability and nuclear power projects take decades to plan and build.

“All this means that natural gas must play an important role in power generation for years to come,” Kinder said.

For the first quarter, the company reported EBITDA was up 7% to $8.16 billion, with earnings per share up 10%, thanks to high usage on its pipelines. The company reported $3.84 billion in earnings, which came in below Wall Street expectations by $540 million.

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