Kinder Morgan Slices $500 Million from 2016 Capital Budget, Keeps Profits Steady

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Researched by Industrial Info Resources (Sugar Land, Texas)--Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) reports that its growth capital forecast for 2016 is approximately $2.8 billion, a reduction of $500 million from its previous budget of $3.3 billion. Nevertheless, the North American energy infrastructure company continues moving onward with large-scale capital and planned maintenance projects. Industrial Info is currently tracking capital and maintenance projects involving Kinder Morgan valued at $22.1 billion.

The company said it was able to cut its project capital cost backlog through a series of measures, including selling half of its interest in the Utopia pipeline project to Riverstone Investment Group LLC, thus halving Kinder Morgan's planned expenditures for the project. The Utopia Pipeline is a common carrier project that will include 215 miles of new, 12-inch diameter pipeline constructed in Ohio from Harrison County to Fulton County. The pipeline will connect with an existing Kinder Morgan pipeline and associated facilities in order to transport ethane and ethane-propane mixtures to petrochemical companies operating in Ontario, Canada. Industrial info is tracking four projects worth $700 million that are linked to the pipeline.

Kinder Morgan executives said the company also pared down capital costs by reducing scope and cost estimates on a natural gas pipelines segment project, and placing the liquefied natural gas (LNG)-ready Magnolia State tanker in service.

One of the largest of these projects is the proposed expansion of the company's Trans Mountain crude oil pipeline, which runs from Alberta's oil sands to the Pacific Coast in Washington state. Kinder Morgan wants to nearly triple the capacity of the pipeline to carry 890,000 barrels per day. The project won approval from Canada's National Energy Board in May, subject to 157 conditions.

In a recent interview with Bloomberg, British Columbia Energy Minister Bill Bennett said the company is "a lot closer" to meeting the conditions for the expansion and that the main issue for the project now is marine spill response. The expansion of the Trans Mountain pipeline has a price tag of more than $4 billion and represents one of the key ways that an increased amount of crude oil from Alberta's oil sands could be exported abroad.

On June 1, the company's planned Elba Island liquefied natural gas (LNG) production plant in Georgia received authorization to commence from the Federal Energy Regulatory Commission (FERC). Construction of the project, which will be sited at an existing LNG regasification terminal, is expected to begin during the third quarter of this year, with the plant planned to start operations in mid-2018. The project is currently awaiting permission from the Department of Energy to export LNG to countries without a free trade agreement with the U.S.

In its terminals sector, Kinder Morgan says that during the second quarter, tank foundation work began at its new Base Line crude oil storage terminal in Edmonton, Alberta. The project involves construction of 12 tanks with a total crude oil storage capacity of 4.8 million barrels and is expected to be commissioned by the end of next year.

The company reported second-quarter 2016 net income of $333 million, which was unchanged from the second quarter of 2015, thanks to lower operating expenses. The steady profits come in spite of the company's revenues dropping by $319 million during the quarter, compared to last year.

Kinder Morgan's natural gas throughput volumes were up 3% compared to second-quarter 2015 due to expansion projects placed into service on the company's Tennessee Gas Pipeline network, as well as deliveries to Cheniere Energy's (NYSE:LNG) (Houston, Texas) Sabine Pass liquefied natural gas (LNG) production facility and increased natural gas deliveries to Mexico.

In addition to major capital projects, Industrial Info is also tracking planned Kinder Morgan maintenance projects valued at more than $105 million, including tank inspections and upgrades, pipeline pigging and turbine overhauls. For detailed information on these and other projects, subscribe to Industrial Info's Global Industrial Project Database

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