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Kinder Morgan nears Gulf natgas line agreements

18 Oct 2017, 10.29 pm GMT

Kinder Morgan nears Gulf natgas line agreements

Houston, 18 October (Argus) — Midstream company Kinder Morgan is close to finalizing shipper agreements on the 1.9 Bcf/d (54mn m³/d) Gulf Coast Express pipeline that will move natural gas from the Permian basin to markets in the Texas coast.

The contracts should be completed and the $1bn-2bn project added to the company's backlog by the end of the year, executives said today during an earnings call. The line is expected to begin service in the second half of 2019.

Kinder Morgan has partnered with Targa Resources and DCP Midstream to develop the line, with Kinder Morgan owning a 50pc share and the other two companies owning 25pc stakes. Independent producer Pioneer Natural Resources will also ship gas on the project.

The contracting process has accelerated this month with Kinder Morgan advancing its agreements with core shippers as "people are realizing they need another way to get out of Waha as volumes going into Mexico are not materializing as quickly as pipeline capacity to move to Mexico has materialized," chief executive Steve Kean said.

Gulf Coast Express is one of three proposed projects to move gas from the Permian and southeastern New Mexico to the Agua Dulce hub near Corpus Christi, Texas.

The pick-up in activity in recent weeks is largely because the project "gives producers options to exploit a large number of varied and different markets and not depend solely on demand growth in Mexico," Kean said.

Kinder Morgan's existing network across Texas provides access to premium pricing at the Houston Ship Channel as well as connections to Mexico, LNG export potential, petrochemical plant demand and Houston-area power generation and industrial demand.

In other areas of the midstream company's pipeline network, three expansion projects under construction on Tennessee Gas pipeline (TGP) are either on time or ahead of schedule. And the Susquehanna West Pipeline came on line ahead of schedule on 1 September, boosting flows on TGP in Pennsylvania by 140mn cf/d.

Natural gas volumes shipped on Kinder Morgan pipelines in the third quarter increased by 3pc from a year earlier, driven primarily by LNG exports and exports to Mexico, while power demand was down on the year. Kinder Morgan began 1.2 Bcf/d of new firm transportation agreements during the quarter, with 700mn cf/d of that total being on existing but previously unsold capacity.

Hurricane Harvey lowered natural gas revenue in the quarter by less than $10mn because of customers on the Texas coast being off line during the storm. Without Harvey, revenue in the segment would have been up slightly on the year because of pipeline expansions.

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