It’s shopping season for America’s pipeline giants.
As they prepare for a wave of new U.S. natural gas production to power AI data centers or to be exported overseas, the top pipeline players are quickly buying up their smaller private competitors to consolidate the industry and build out scale.
This week, Tulsa, Oklahoma-based ONEOK bought West Texas’s Brazos Midstream’s Permian Basin assets for $4.42 billion. This comes shortly after pipeline giant Williams acquired Momentum Midstream and its Texas and Louisiana pipeline gathering and processing facilities for $5.5 billion. In May, Western Midstream paid $1.6 billion for Brazos’ Delaware Basin facilities in the western lobe of the Permian.
In the 20 years of U.S. shale gas boom since 2006, U.S. natural gas production has more than doubled—following over three decades of flat output—and is projected to continue skyrocketing through 2050. The U.S. now produces about a quarter of the world’s natural gas—almost double the output of second-place Russia—and leads the world in liquefied natural gas (LNG) exports, even though the U.S. only started shipping LNG 10 years ago.
The continued buildout of LNG export facilities in Texas and Louisiana, coupled with surging domestic demand to power AI, means that U.S. natural gas output could rise another 35% from now until 2050 up to 150 billion cubic feet per day (Bcf/d)—versus 50 Bcf/d 20 years ago—according to U.S. Department of Energy projections.
London Spivey, energy analyst for East Daley Analytics, told Fortune that ONEOK is getting a good value to grow its large footprint in the Permian’s more mature Midland Basin through the Brazos deal.
“They’re getting the gas to help feed that AI demand to profit along every step of the value chain,” Spivey said, acquiring the gathering lines from the wells and the gas processing plants. “They pull it out of the ground, they bring it to their plant, they process it, they’re able to put it on one of their pipelines and transport it to that end demand, whether it’s data centers or feeding LNG.”
The Brazos deal includes 700 miles of gathering lines and 1.2 Bcf/d of gas processing capacity.
“It highlights the trend that we’ve been seeing across the entire industry of these big publics going in and buying out all these privates and consolidating,” Spivey added.
In an interview prior to the Brazos deal, ONEOK CEO Pierce Norton told Fortune that the company is positioning itself for the rise of natural gas supplies.
“There will eventually have to be more drilling in the United States than what’s going on right now, which will probably mean that [gas] price does creep up,” Norton said. “The demand is going to be there, and it’s going to be driven by LNG exports and the AI data centers.”
Norton said he is constantly talking to multiple data center developers “There seems to really be a focus on Texas right now.”
Separate from the Brazos deal, ONEOK and partners are building 450-mile Eiger Express Pipeline to move gas from the Permian to the Houston area, coming online in 2028. Customer interest was so high, they quickly increased the planned pipeline capacity from 2.5 Bcf/d to more than 3.5 Bcf/d.
There are a bevy of long-haul pipelines under development now from West Texas to the Gulf Coast to solve a bottleneck problem that had contributed to negative regional spot prices at times—some producers literally had to pay to have excess gas taken away. “The problem with the gas price in the Permian is going to get solved when all these pipes get built out,” Norton said.
Rising demand
The gassy Haynesville Shale in Louisiana and East Texas and the booming Permian Basin—which produces a lot of gas along with oil—are poised to surge their outputs to match demand.
Geographically, the LNG export buildout is focused on the Texas and Louisiana Gulf Coast. Now, it’s no coincidence that data center developers are focusing projects in the same states—close to ample natural gas supplies for power and within industry-friendly regulatory environments.
As Norton noted, as the oily Permian matures and depletes, its volumes will produce higher ratios of natural gas. So, even if oil output stays flat, natural gas production will inevitably rise without any additional activity.
“Our little motto is that we want to touch as many molecules as we can for as long as we can,” Norton said. “It’s that integrated value chain.”
A few years ago, ONEOK was too small to fulfill those ambitions, he said. So, ONEOK went on a shopping spree.
In 2023, ONEOK bought Magellan Midstream for $18.8 billion, including debt. In 2024, the company acquired both EnLink Midstream and Medallion Midstream. The Magellan and Medallion deals were largely focused on crude oil and refined products. But the EnLink deal was heavily concentrated on gas infrastructure in Texas, Louisiana, and Oklahoma. “EnLink was the perfect fit,” Norton said.
The new Brazos deal adds onto that scale and integrates well into ONEOK’s existing footprint, Norton said in a conference call this week. “This is a decisive step in the strategy that we have executed for years, building scale in the most attractive producing regions and connecting that supply to ONEOK’s integrated system.”
The only problem is ONEOK had assumed plenty of debt in its prior deals. So, to fund the Brazos acquisition, Apollo Global Management is taking a minority stake in ONEOK through a $9 billion investment—$4 billion for Brazos and $5 billion for debt reduction.
For ONEOK, it’s a bullish bet on gas from the most productive basin in the country, the booming Permian.
“They’re picking the basins that they want to fight for, and they’re piecemeal acquiring as they’re trying to get dominant,” Spivey said.
