Kinder Morgan's Pending Kickoffs for Elba Island LNG, Permian Pipeline Among $24 Billion in Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) overcame a drop in oil prices in late 2018 to end the year with an overall growth in revenues and profits. The second-largest North American pipeline operator is beginning 2019 with key developments on a massive liquefied natural gas (LNG) project and a much-needed midstream system. Industrial Info is tracking nearly $24 billion in active projects worldwide involving Kinder Morgan, including more than $2 billion worth set to begin construction in the U.S. this quarter.

Click on the image at right for a graph detailing the top 10 U.S. states for active Kinder Morgan projects.

One of Kinder Morgan's most widely anticipated projects is nearing a milestone: The $2.5 billion first phase of the Elba Island LNG Liquefaction in Savannah, Georgia, which is expected to begin production this quarter and wrap up toward the end of the second quarter. The project comprises six trains that will convert about 210 million standard cubic feet per day of natural gas into 2.5 million tons per year of LNG for export. For more information, see Industrial Info's project report.

"On our Elba Liquefaction Project, we currently anticipate that we will be in service at the end of the first quarter," said Kim Dang, the president of Kinder Morgan, in an earnings-related conference call. "Of course this has continued to be delayed, but fortunately we do not expect the delays to have a material impact on our costs, given the way our construction and commercial contract is structured."

The $500 million second phase of Elba Island LNG accounts for nearly 25% of the total investment value (TIV) for Kinder Morgan projects set to kick off before the end of March. It includes four trains that will process 140 million standard cubic feet per day of natural gas into 1.5 million tons per year of LNG for export. Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) has agreed to purchase all LNG produced at Elba Island. For more information, see Industrial Info's project report.

Natural gas producers are waiting on pins and needles for Kinder Morgan to begin construction this quarter on its planned Gulf Coast Express pipeline, which will transport up to 1.98 billion cubic feet per day of gas from the Permian Basin to the Agua Dulce, Texas, area. The Permian Basin is in dire need of midstream projects, as some producers have had to slow down work in the past year due to insufficient takeaway capacity. Natural gas production in the Permian Basin has doubled over the last three years alone.

The estimated $500 million first spread for Gulf Coast Express will run 82 miles from the Waha Hub near Coyanosa to Rankin, Texas, while the estimated $450 million third and fourth spreads will run 103 miles from Del Rio to Agua Dulce, Texas. Both are currently expected to wrap up in first-quarter 2020. For more information, see Industrial Info's project reports on spread 1 and spreads 3 and 4.

Kinder Morgan also is planning a series of compressor stations, each valued at $35 million, to service Gulf Coast Express that are slated to begin construction soon. These stations, each of which includes a turbine-driven compressor gas package with auxiliary equipment, can be found:

• west of Fort Stockton; see project report
• west of Sanderson; see project report
• west of Pumpville; see project report
• north of Uvalde; see project report
• west of Auga Dulce; see project report

Each station is expected to be completed in the first quarter of 2020.

Compressor stations are nearing construction for other Kinder Morgan pipeline systems. The $68 million Sabine Pass Compressor Station 348 in Cameron, Louisiana, is expected to support the nearby Sabine Pass Export Facility, while the $56 million Sierrita Compressor Station in Tucson, Arizona, will support a 61-mile system transporting 200 million standard cubic feet per day of gas from Tucson to the U.S./Mexico border near Sasabe, Arizona. For more information, see Industrial Info's reports on the Sabine Pass and Sierrita projects.

Kinder Morgan's revenues for the year were reported to be $14.14 billion, a 3.2% increase from 2017; net income stood at $1.5 billion, compared with $28 million in 2017.

PG&E's Pending Bankruptcy Rattles Pipeline Watchers
Industry watchers have expressed concerns that the impending bankruptcy of California's Pacific Gas and Electric Company (San Francisco, California) and its corporate parent, PG&E Corporation (NYSE:PCG) (San Francisco), could impact Kinder Morgan's Ruby Pipeline. The midstream system transports 1.5 billion cubic feet per day about 680 miles from the Wyoming Rockies to customers in California, Nevada and the Pacific Northwest. Steve Kean, the chief executive officer of Kinder Morgan, acknowledged that two contracts, together valued at $93 million in revenue per year, could be negatively affected.

"One of those contracts serves the electric generation that PG&E uses to obviously generate power and service load," Kean said. "The other provides service to PG&E's gas distribution business. So we view both of those as core--or contracts that are core to PG&E's business."

Nonetheless, Kean said there were "reasons for optimism." "These contracts are used by PG&E, and we've been told to expect continued utilization of those contracts," he said. "These contracts help PG&E meeting its service obligation to core customers. The contracts were approved by the CPUC [California Public Utilities Commission] when they are entered into. The CPUC does require PG&E to maintain upstream firm transport capacity. And so those reliability aspects we think help improve the chances of affirmation."

For more information, see January 15, 2019, article - PG&E to File for Bankruptcy Protection, Engulfed by Wildfire Liabilities.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at https://www.industrialinfo.com/.