Piñon Midstream’s sour gas facility goes online - Midland Reporter-Telegram

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Executives at Piñon Midstream knew there would demand for its new Dark Horse sour gas treating and carbon capture facility in Lea County, New Mexico. But the level of demand is pushing their expansion plans along faster than anticipated.

The facility has been placed online with initial capacity fully subscribed, operating near its initial treating capacity of about 85 million cubic feet of sour natural gas per day. A second amine treating plant is expected to enter service later this month and there is already a need for a third.

Justin Bennett, co-founder and chief commercial officer, said the company had anticipated the third plant by the end of 2022 but with commitments already in hand, that could be expedited to earlier in the year.

“Things have changed drastically” since the business was organized, he told the Reporter-Telegram in a telephone interview, citing commodity prices that have climbed to $80 crude and natural gas between $5 and $6 per Mcf.

“All our upstream customers are excited,” he said. “They’re about spending money, running more rigs and producing more oil and natural gas.”

He said there is also growing interest in Piñon’s services capturing carbon from customers’ gas streams, which not only helps their ESG – Environmental, Governance and Social – initiatives but his company’s initiatives as well.

“There’s a lot of initiatives in the works” to subsidize carbon capture, he said, listing the 45Q tax credit and voluntary carbon offsets.

Dark House was specifically built to capture and sequester both carbon dioxide and hydrogen sulfide from customers’ gas volumes, delivering the ‘sweet’ gas to third-party midstream processers in the region. It is expandable to up to 400 million cubic feet of sour gas per day.

The second amine plant to open this month will boost treating capacity at Dark Horse to 170 million cubic feet a day.

Bennet said Piñon is also drilling a second acid gas injection well to sequester CO2 and H2S. At 18,000 feet, the Independence AGI #1 is New Mexico’s deepest and largest acid gas injection well with capacity to permanently sequester up to 175,000 tons of CO2 and 75,000 tons of H2s annually. Independence AGI #2 is expected to be completed next year.

Beyond expansion of its Dark Horse infrastructure, Piñon has closed on a new senior secured credit facility with BOK Financial, Bennett reported.

The company’s expansion was delayed earlier this year when President Biden issued a moratorium on oil and gas permits on federal lands, he said. The company had permits for a planned 16-inch high pressure gathering pipeline from the Dark Horse facility to the planned Chama Compressor Station. The moratorium delayed final permits, but he said Piñon now has them in hand and plan to begin construction of the pipeline later this year, with completion expected early next year.

“We’re growing faster than we expected,” Bennett said. While there is plenty to keep the company busy in Lea County for a while, he said Piñon has identified other areas for possible expansion – mostly in the Delaware Basin but in other areas as well.

“Right now, our main focus is on Dark Horse,” he said. “We’re excited to to be providing this service to our customers.”

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