Kinder Morgan commits $4.2B to build Texas gas pipeline for AI data centers

The deal demonstrates hyperscalers are ready to fund long-term fuel infrastructure, rather than just compute, to secure their power. Natural gas is reinforced as the bridge fuel for AI. The Permian Link will add 2.8 bcf/d of Permian Basin takeaway capacity, easing pipeline constraints that have pushed Waha gas prices negative and raising structural US gas demand over the next decade. Growing pipelines of data centre and utility contracts will likely benefit midstream operators in the Permian and Southeast. Take-or-pay deals make their revenue more predictable. A timing gap exists, however, because 2030 starting dates mean data centres going live earlier will still compete for existing grid and gas capacity, keeping near-term pressure on power prices in key hubs.

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• In Australia, shares of NEXTDC fell 44%, with power delays underscoring a bottleneck for AI data centres.

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A 20-year gas supply deal through a Texas pipeline shows the AI boom is now building real infrastructure. Data centres are establishing their own power supply chains.

Summary:

• A formal commitment was made by Kinder Morgan to the Permian Link, a $4.2bn joint venture where its stake is about $1.6bn.
• From 2030, the roughly 434-mile line will transport about 2.8 bcf/d of gas from the Permian Basin to the Midcontinent, serving the Texas Panhandle.
• Under a 20-year take-or-pay deal, the anchor customer is the power provider for an unnamed A-rated hyperscaler.
• Approval was also granted for the Southeast Connector, a $3.1bn project (Kinder Morgan's share) providing 2.6 bcf/d for investment-grade utilities from 2030.
• The adjusted Q3 EPS of $0.35 exceeded the $0.32 estimate, and the project backlog grew to $14.4bn from $9.6bn.
• Interest from other customers beyond the anchor was noted, and large-load applications in the Southeast exceed 200 GW, executives said.

Kinder Morgan has made a formal commitment to a $4.2bn gas pipeline across West Texas and the Panhandle. The project will support a hyperscale data centre, part of a new wave of US energy infrastructure spurred by surging AI electricity demand.

The Permian Link will run about 434 miles on Kinder Morgan's NGPL system, carrying 2.8 bcf/d from the Permian Basin near Pecos County to the Midcontinent system. Kinder Morgan's outlay is around $1.6bn. Service will start in 2030. Gas will flow north to the Texas Panhandle, and the connection to storage will boost reliability.

Power providers for an unnamed A-rated hyperscaler are the anchor customer, with a 20-year take-or-pay contract (where capacity is paid for regardless of use). Other interested parties have also emerged, executives reported.

The Southeast Connector, on the Southern Natural Gas system, was also launched. Kinder Morgan's stake is around $3.1bn. It provides 2.6 bcf/d for investment-grade utilities, starting between 2030 and 2032. Expansion is possible if demand grows. Management noted over 200 GW of large-load requests in the Southeast. The combined $4.7bn share from Kinder Morgan is a commitment linked to rising demand from power plants, data centres and LNG exporters.

The effects on data centres are broad. Reliable power is a major constraint on AI. A 20-year fuel contract by a hyperscaler indicates operators are locking in their own long-term supply instead of solely depending on the grid. On-site gas-fired generation, supported by long-term supply, can be built faster than grid upgrades. This could unlock sites in the Texas Panhandle, where gas and land are plentiful.

The third-quarter results, released with the announcements, beat forecasts. Adjusted EPS climbed 21% to $0.35, above the $0.32 consensus. The project backlog advanced to $14.4bn from $9.6bn, driven by a record $13.2bn in natural gas projects. Kinder Morgan expects full-year results to exceed its budget.