Kinder Morgan and Sempra Energy Team Up for New $3 Billion Natural Gas Pipeline

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Kinder Morgan Energy Partners (NYSE:KMP) (Houston, Texas) and Sempra Pipelines and Storage, (San Diego, California) a business unit of Sempra Energy Resources (NYSE:SRE) (San Diego, California), have entered into a Memorandum of Understanding (MOU) that could result in the formation of a joint venture to construct a new $3 billion 1,500-mile long natural gas pipeline to provide transportation services for increased natural gas production in the Rocky Mountains area. Kinder Morgan will assume the lead role in the pipeline partnership with a 66% interest in the join venture.

If the pipeline is constructed it will be designed as a 42" diameter natural gas pipeline originating at the Wamsutter hub in Wyoming and terminating to the east near Leidy, Ohio. The initial throughput capacity will be up to 2 billion cubic feet per day (Bcf/d) for markets in the east. The pipeline could require the construction of ten to fifteen new compressor stations along its path.

The two companies hope to firm up customer demand by late 2005 and make a FERC filing by the first quarter of 2006. Construction on the new pipeline could begin as early as 2007 with a two-phase completion set for 2008 and 2009. In addition to development activities for the pipeline project, Sempra Pipelines & Storage has agreed to bid on 200 million standard cubic feet per day (mmscfd) of firm capacity on the pipeline during an upcoming open season to gauge customer demand for the mega pipeline scheme.

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