Kinder Morgan Seeks Solid Returns from Ethanol, Marcellus Shale

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Researched by Industrial Info Resources (Sugar Land, Texas)--Energy pipeline transportation and storage company Kinder Morgan Energy Partners (NYSE:KMP) (KMP) recently reported third-quarter 2010 net income of $320.8 million, compared to $359.5 million from the same period last year, despite year-over-year increases in most of the company's business segments.

The company's Products Pipelines business increased earnings before depletion, depreciation and amortization (DD&A) and "certain items" to $171.6 million, an increase of 3% from 3Q09. "Revenues increased by 8.3% compared to the third quarter last year, led by an increase in ethanol storage and blending," said Chairman and CEO Richard D. Kinder. Ethanol volumes handled in this segment were 7.6 million barrels, an increase of 25% over last year's third quarter. Year to date, KMP has increased ethanol volumes 34%. Earnings in the company's CO2 and Terminals business segments were up 16% and 14% year over year, respectively.

As the development of gas shales continues, new gas transmission projects, particularly in the region of the Marcellus Shale, are increasing. For an overview of pipeline project activity in the region, see February 15, 2010, article - Marcellus Shale Could Change the Face of Pipeline Construction in the U.S. Northeast. KMP is one of numerous companies with plans to construct a pipeline to deliver gas from the shale.

Next year, the company plans to begin construction of the Cochin Marcellus Lateral Pipeline, a natural gas liquids (NGL) pipeline that will run from Marshall County, West Virginia, to Fulton County, Ohio, where it will connect with KMP's Cochin Pipeline, the 1,900-mile pipeline running between Fort Saskatchewan, Alberta, and Sarnia, Ontario, traversing several U.S. states along the way. The company is currently seeking commercial agreements with shippers before commencing construction, and hopes to obtain enough binding contracts to begin construction in mid-2011 and commence operations of the 240-mile pipeline in the third-quarter of 2012.

The pipeline lateral will transport NGL from the Marcellus Shale to storage facilities in Ontario. The project could employ up to 2,500 people during construction. Requests for qualification are expected to be released early next year. The project is part of $840 million in Kinder Morgan pipeline projects being tracked by Industrial Info. Information on this and more than $39 billion in active oil & gas transmission projects can be found in Industrial Info's North American Industrial Database.

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