Must-know: Are MLPs geared to face gas boom challenges?

Market Realist

Energy Information Administration short-term outlook affects MLPs (Part 9 of 10)

(Continued from Part 8)

KMP’s projects in gas shale

Kinder Morgan Energy Partners (KMP) is one of the largest master limited partnerships (or MLPs) that operates as a pipeline transportation and energy storage company in the U.S. KMP is connected to every important U.S. natural gas resource play, including the Eagle Ford, Barnett, Utica, Marcellus, and Haynesville. KMP is poised to invest over $14 billion in these areas as a part of its growth projects. Recent growth projects include the Tennessee Gas Pipeline (or TGP) in which KMP has signed a binding, 15-year firm transportation agreement with Seneca Resources Corporation to ship 158,000 dekatherms per day of natural gas to eastern Canadian markets. This project is expected to begin service November 1, 2015. It is important to note that TGP was a dropdown from KMP’s general partner, Kinder Morgan Inc. (KMI).

Apart from this, the company is also investing in the TGP-Utica Blackhaul transportation system, which will carry gas from the Utica to the Gulf Coast.

In addition, KMP and Targa Resources (NGLS) are pursuing a possible joint venture to construct new natural gas liquid (or NGL) fractionation facilities at Mont Belvieu, Texas, to provide services for producers in the Utica and Marcellus Shale resource plays in Ohio, West Virginia, and Pennsylvania. The facilities would provide fractionation services for customers of the Utica and Marcellus Texas Pipeline (or UMTP)—a proposed joint venture between MarkWest (MWE) and KMP which was announced in 4Q13. The pipeline would have capacity of 150,000 barrels per day (or bpd) and would expand over time to 400,000 bpd.

DPM’s projects in Mid-continent and Permian

DCP Midstream Partners L.P. (DPM) is a diversified MLP. It operates in three segments: Natural Gas Services, Natural Gas Liquids (or NGLs) Logistics, and Wholesale Propane Logistics. DPM has prominent presence in the mid-continent region as well as in the Permian Basin. To accommodate the production growth in the Anadarko and Woodford basin extension in the mid-continent, DPM has committed to spend $2 billion to meet additional capacity. One of the prominent assets in the mid-continent region is the Southern Hills Pipeline system which was dropped down by its general partner.

To support the growth in the Permian Basin, DPM is planning several capacity expansion and growth projects including a 200 million cubic feet per day (or MMcf/d) natural gas processing plant, to keep up with its $2 billion capex spending in this region. One of the DPM’s major assets is the Texas Express NGL Pipeline. This provides the much-needed takeaway capacity from the Rockies, the Permian Basin, and the mid-continent Gulf Coast.

Natural gas production drives growth for gathering and processing midstream operators like Williams Partners (WPZ), Kinder Morgan Partners (KMP), Boardwalk Pipeline Partners (BWP), and DCP Midstream Partners (DPM). WPZ, KMP, NGLS, and DPM are all a part of the Alerian MLP ETF (AMLP). KMP is one of the significant components of AMLP.

Continue to Part 10

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