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Kinder Morgan Farms Out of COLT Deepwater Export Project

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Kinder Morgan, Inc KMI has withdrawn from Enbridge Inc’s ENB proposed Texas COLT deepwater crude oil export project off Freeport, TX on the Gulf of Mexico coast.

Kinder Morgan had mentioned the time commitment to move the project through a regulatory phase. However, a recent internal review revealed that the project was not in line with the company’s strategic priorities.

The project, estimated at a cost of around $800 million, was planned to be built in a Gulf of Mexico area that is located about 40 miles south of Freeport. The project began as a joint venture of Enbridge, Kinder Morgan and German marine terminal operator — Oiltanking — to accommodate Very Large Crude Carriers (VLCCs). It is one of eight similar projects that have been proposed to transfer U.S. shale to overseas markets by loading supertankers capable of carrying about 2 million barrels each.

The plans for this project were revealed in January, 2019 by Kinder Morgan and Enbridge when a permit application was filed with the U.S. Maritime Administration. Oiltanking remains committed to the project.

Enbridge has opted to farm in to Kinder Morgan’s stake in the project. It expects the facility to be well positioned to cater to the supply diversity that attracts overseas U.S. crude buyers.

The proposed COLT project will be capable of loading 23 supertankers per month at a rate of 85,000 barrels per hour. Oil will be transferred through a 42-inch (107 centimeter) pipeline. The vessels will be anchored at an offshore platform about 30 miles (48 kilometers) off Texas, in 110 feet (33.5 meters) of water.

VLCCs, which have a capability of carrying 2 million barrels of crude oil in a single load, are turning out to be the tanker of choice for exports. However, U.S. ports are not prepared to handle them as they are too shallow. A fully loaded VLCC tanker requires 66 feet of water, while ship channels in Texas and elsewhere are usually40-45 feet.

Subject to receiving approval from the authorities, the offshore export terminal will be supported by an underwater pipeline and an onshore tank farm. The unit will be capable of storing around 15 million barrels of crude.

The offshore platform would be able to load a VLCC tanker in a day by getting crude oil from U.S. shale plays such as the Permian Basin in West Texas, the Eagle Ford Shale in South Texas and the Bakken Shale of North Dakota.

Zacks Rank & Key Picks

Currently, Kinder Morgan carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Antero Resources Corporation AR and CrossAmerica Partners L.P. CAPL. Both Antero Resources and CrossAmerica Partners sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Antero Resources is an independent explorer, primarily engaged in the acquisition and development of natural gas, natural gas liquids as well as oil resources in the Appalachian Basin. The company’s earnings beat the Zacks Consensus Estimate in two of the last four quarters.

CrossAmerica Partners is involved in the wholesale distribution of motor fuels, comprising gasoline and diesel fuel. The partnership delivered an average positive earnings surprise of 452.2% in the last four quarters.

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