Overview: Where U.S. natural gas production is headed (Part 4 of 5)
Kinder Morgan Energy Partners
Kinder Morgan Energy Partners (KMP) is one of the largest master limited partnerships that operates as a pipeline transportation and energy storage company in North America. Its pipelines transport natural gas, gasoline, crude oil, CO2, and other products. Its terminals store petroleum products and chemicals and handle products such as ethanol, coal, petroleum coke, and steel.
The pipeline systems include approximately 8,600 miles of petroleum pipelines, 33,000 miles of natural gas pipelines and gathering lines, and 1,500 miles of CO2 pipelines. It also includes a 450-mile crude oil pipeline system.
KMP’s well-connected natural gas pipelines benefit its natural gas producer customers
Over half of KMP’s EBITDA comes from the natural gas pipeline segment, which is stable fee-based revenue. Also, a portfolio of irreplaceable assets gives KMP an edge over its competitors because it’s connected to every important U.S. natural gas resource play, including the Eagle Ford, Barnett, Utica, Marcellus, and Haynesville. The natural gas production boom is positive for players like KMP who have well connected pipelines, making it easier for their producer customers to transport natural gas via KMP’s pipelines.
To accommodate this growth further, the company is slated to invest over $14 billion in these areas as a part of its growth projects. It has several strategic acquisitions lined up as well. Recent growth projects include the Tennessee Gas Pipeline (or TGP) which 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-Utika Blackhaul transportation system, which will carry gas from the Utica to the Gulf Coast.
Strategic join ventures with other midstream operators to meet oversupply challenges
The huge supply volume has created a crunch on the existing pipeline infrastructure and the entire industry is gearing up to meet the supply pressure. As a result, midstream MLPs are joining hands to meet the rising needs of their producer customers. This can be seen from the joint venture recently announced between KMP and Targa Resources Partners’ (NGLS).
Both KMP and NGLS are pursuing a possible joint venture to construct new 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.
KMP, NGLS, and MWE are all a part of the Alerian MLP ETF (AMLP). KMP is one of the significant components of AMLP. To learn about AMLP’s top four components, read our Market Realist series on Must-know: An investor’s guide to the Alerian MLP ETF (AMLP).
Read the next section of this series to learn about how other midstream companies are accommodating the natural gas production boom.
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