Kinder Morgan commits to $4.2B Texas gas pipeline to fuel hyperscale data center power

The deal shows hyperscalers are now willing to underwrite long-term fuel infrastructure, not just compute, to secure power. That reinforces natural gas as the main bridge fuel for the AI build-out. For the gas market, Permian Link adds about 2.8 billion cubic feet a day of takeaway capacity from the Permian Basin. That should help ease pipeline constraints that have periodically pushed local Waha gas prices deeply negative, while lifting structural demand for US gas over the decade. Midstream operators with Permian and Southeast exposure are likely to benefit from a growing pipeline of data centre and utility contracts. Long-dated take-or-pay commitments make their earnings more predictable. The 2030 start dates highlight a timing gap, however: data centres coming online before then will still compete for existing grid and gas capacity, which keeps near-term pressure on power prices in key hubs.---Contrast with Australia yesterday:NEXTDC shares plunge 44% as power delays expose AI data centre bottleneck---The AI boom is now laying steel in the ground: a hyperscaler has locked in 20 years of gas supply through a new Texas pipeline, a sign that data centres are building their own power supply chains.Summary:Kinder Morgan formally committed to Permian Link, a $4.2 billion joint venture pipeline, with its share at about $1.6 billionThe roughly 434-mile line will carry about 2.8 bcf/d of gas from the Permian Basin to the Midcontinent, serving power demand in the Texas Panhandle, from 2030The anchor customer is power providers serving an unnamed A-rated hyperscale data centre operator, under a 20-year take-or-pay contractKinder Morgan also approved the Southeast Connector, with its share at about $3.1 billion, adding up to 2.6 bcf/d for utilities from 2030 to 2032Q3 adjusted EPS of 35 cents beat the 32-cent estimate, and the project backlog rose to $14.4 billion from $9.6 billionExecutives said other customers have shown interest beyond the anchor hyperscaler, and Southeast large-load interconnection requests exceed 200 GWKinder Morgan has formally committed to building a $4.2 billion natural gas pipeline across West Texas and the Panhandle to help power a hyperscale data centre complex, as surging electricity demand from artificial intelligence drives a new wave of US energy infrastructure.The Permian Link project, a joint venture on Kinder Morgan’s Natural Gas Pipeline Company of America system, will carry about 2.8 billion cubic feet of gas a day along roughly 434 miles of new pipe, from the Permian Basin near Pecos County to NGPL’s Midcontinent system. Kinder Morgan’s share of the cost is about $1.6 billion, and the line is expected to enter service in 2030. The gas will move north to serve power demand in the Texas Panhandle, and the project links to storage to improve reliability.The anchor customer is power providers serving an unnamed A-rated hyperscale data centre operator, under a 20-year take-or-pay contract. Under that type of agreement, the customer pays for reserved capacity whether or not it uses it. Executives said other customers have also shown interest.The project was announced alongside the Southeast Connector, on Kinder Morgan’s Southern Natural Gas system, where its share is about $3.1 billion. That line will add up to 2.6 bcf/d of capacity for investment-grade utilities, entering service in phases from 2030 to 2032, and could be expanded if more customers sign. Management cited more than 200 GW of large-load interconnection requests in the Southeast. Together, Kinder Morgan’s share of the two projects is about $4.7 billion, a commitment it linked to rising demand from power plants, data centres and LNG exporters.The broader implications for data centres are significant. Securing reliable power has become one of the biggest constraints on the AI build-out, and a hyperscaler signing a 20-year fuel contract suggests operators are increasingly willing to lock in their own long-term energy supply rather than rely solely on the grid. Long-term gas supply also supports on-site and dedicated gas-fired generation, which can be built faster than many grid upgrades. That could help unlock new data centre sites in regions such as the Texas Panhandle, where land and gas are abundant.The announcements came with third-quarter results that beat expectations. Adjusted earnings per share rose 21% to 35 cents, ahead of the 32-cent consensus, and the project backlog climbed to $14.4 billion from $9.6 billion, with natural gas projects at a record $13.2 billion. Kinder Morgan said full-year results are on track to exceed its budget. This article was written by Eamonn Sheridan at investinglive.com.