Kinder Morgan to Spend $2.2 Billion in 2018 on Expansions, Faces More Delays on Trans Mountain

Researched by Industrial Info Resources (Sugar Land, Texas)--Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) expects to invest $2.2 billion on expansion projects and other discretionary spending in 2018, although the company acknowledged that one of its key North American projects, an expansion of Canada's Trans Mountain Pipeline, likely will see its completion delayed beyond its previous estimate of September 2020. Industrial Info is tracking more than $22 billion in active projects involving Kinder Morgan, including more than $9.1 billion that are nearing or under construction.

Industrial Info is tracking all major aspects of the Trans Mountain Expansion, including a $3.5 billion segment in British Columbia and a $1.19 billion segment in Alberta, which would run 690 and 290 kilometers, respectively, from a point near Hargreaves, British Columbia, to a crude oil pump station in Hinton, Alberta. The project also includes $100 million in terminal tank additions and $100 million in pump station expansions near Edmonton, Alberta, all of which would help to nearly triple the pipeline's capacity to 890,000 barrels per day (BBL/d). For more information, see Industrial Info's project reports on the British Columbia and Alberta segments, and the terminal and pump station expansions.

Kinder Morgan said in a press release that a lack of clarity on key permits, approvals and judicial reviews for the Trans Mountain expansion resulted in the delays. In a separate statement made to Canada's energy regulator, Kinder Morgan said the project had been pushed back due to what it claimed was vague timelines from the city of Burnaby, British Columbia, according to Reuters. The September 2020 kickoff date itself represented a delay of nine months from an earlier estimate.

Kinder Morgan has not updated its cost estimate for the Trans Mountain expansion since the first quarter, but it said in the press release that it expects to provide an update before the end of the year, and give a more detailed timeline for the project in 2018.

Natural Gas Demand Spurs Big-Ticket U.S. Projects
U.S. demand for natural gas is expected to rise by an average of 3% per year until 2026, according to the U.S. Energy Information Administration (EIA). Kinder Morgan transports about 40% of the natural gas that is consumed domestically, accounting for more than half of its total earnings, according to the company. Accordingly, the company is at work on the Utica Marcellus Texas Pipeline (UMTP) project, which is designed to transport purity and mixed natural gas liquids (NGL) produced in the Utica and Marcellus shales to delivery points along the Texas Gulf Coast.

Kinder Morgan is abandoning and converting 964 miles of natural gas service on its existing Tennessee Gas Pipeline (TGP) to accommodate UMTP. In September, the Federal Energy Regulatory Commission (FERC) approved the abandonment plan, but earlier this week, FERC said it would give itself unlimited time to consider a request for rehearing amid objections from Pennsylvania's Allegheny Defense Fund. The TGP conversions include:

• $155 million segment in Ohio; see project report
• $240 million segment from the Ohio border to Greenup County, Kentucky; see project report
• $170 million segment from Greenup County to Powell, Kentucky; see project report
• $160 million segment from Powell, Kentucky, to Nunnelly, Tennessee; see project report
• $270 million segment from Nunnelly, Tennessee, to Greenville, Mississippi; see project report
• $210 million segment from Greenville, Mississippi, to Natchitoches, Louisiana; see project report

The U.S. is expected to become the world's largest exporter of natural gas within a decade, and is making similar progress in the market for liquefied natural gas (LNG). Kinder Morgan's $2.5 billion construction of the Elba Island LNG liquefaction plant in Savannah, Georgia, is among the key developments in the U.S. NGL market; it is expected to convert 210 million standard cubic feet per day of gas into 2.5 million tons per year of LNG for export to Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) facilities abroad. It is set to be completed early next year, when a $1.5 billion second phase with an expected capacity of 1.5 million tons per year is expected to begin construction. For more information, see Industrial Info's project reports on the first and second phases.

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