KMI gas volumes up 14%, Q4 net earnings $610 million

Kinder Morgan Inc. (KMI) shipped 14% more natural gas in fourth-quarter 2019 than the same quarter a year earlier, the company’s eighth consecutive quarter of at least 10% or greater growth in gas transport volumes. It reported quarterly net income of $610 million. KMI also closed on the sale of the US portion of the Cochin pipeline and its 70% interest in Kinder Morgan Canada Ltd. to Pembina Pipeline Corp.

“Our company had another strong quarter with earnings from our base business augmented by the two major projects placed in service during the third and fourth quarters of 2019, Gulf Coast Express Pipeline (GCX) and the Elba Liquefaction project,” said Chief Executive Officer Steve Kean, also citing multiple approvals from the US Federal Energy Regulatory Commission (FERC) for other natural gas projects.

KMI said it had secured 99% of rights-of-way for its 2.1-bcfd Permian Highway (PHP) gas pipeline project and that construction on its western spread near Waha, Tex., was “well underway.” The company expects to receive US Army Corp of Engineers permitting “soon” and to place Permian Highway in service early 2021.

Permian Highway will use 430 miles of 42-in. OD pipe to transport gas to the US Gulf Coast and Mexico. The system’s 2.1-bcfd is fully subscribed under long-term, binding agreements. Kinder Morgan Texas Pipeline (KMTP), EagleClaw Midstream, and Altus Midstream each hold ownership interest of about 26.7%, and an affiliate of an anchor shipper has a 20% interest. KMTP is building and will operate the pipeline.

Elba Liquefaction Co. (ELC) continues commissioning and startup of the 10 liquefaction units that comprise its portion of the Elba Liquefaction project. Three units were placed in service in 2019, and a fourth unit went in service in January 2020. The remaining six units are scheduled to be placed in service first-half 2020.

The plant will have total liquefaction capacity of 2.5 million tonnes/year of LNG, equivalent to about 350 MMcfd of natural gas. The nearly $2 billion project is supported by long term contracts with Shell. ELC, a KMI joint venture with EIG Global Energy Partners as a 49% partner, owns the liquefaction units and other ancillary equipment.

The company realized its largest natural gas transport gains on El Paso Natural Gas (EPNG), Tennessee Gas Pipeline (TGP), and Colorado Interstate Gas (CIG), followed by Kinder Morgan Louisiana Pipeline (KMLP), GCX and its Texas intrastate pipelines. EPNG benefited from Permian-related activity and colder California weather, TGP from new projects placed in service, CIG from increased DJ production and higher heating demand on the Rocky Mountains’ Front Range, KMLP from the Sabine Pass Expansion in-service, GCX from going into service, and the Texas Intrastates from the continued growth in the Texas Gulf Coast market.

KMI’s natural gas gathering volumes rose 8% from fourth-quarter 2018 due primarily to higher volumes on the South Texas, Eagle Ford, and Bakken midstream systems. NGL transport volumes were up 23% compared with fourth-quarter 2018, due to higher Cochin volumes.

Crude and condensate pipeline volumes and total refined product volumes were flat compared with fourth-quarter 2018. The company’s liquids terminals business moved record volumes across its Houston Ship Channel hub with refined products exports averaging 328,000 b/d for the quarter.

Construction activities are underway for projects across KMI’s Texas intrastate system, including the Dayton Loop Project that is on schedule to be placed in service first-quarter 2020. This project will provide incremental takeaway capacity from the east Texas and Goodrich areas to the Houston Ship Channel, Texas City, and Katy, Tex., market areas. KMI is investing more than $325 million in a collection of projects, including the Dayton Loop, designed to increase capacity by 1.7 bcfd and improve connectivity across its Texas intrastate system, supporting distribution of significant incremental volumes as GCX, PHP, and other new Permian basin takeaway projects increase transmission capacity.

Construction is complete on a new 150-MMcfd cryogenic gas processing plant in McKenzie County, ND, placed in service Nov. 1, 2019. About 275 MMcfd of gathering capacity is also being created through pipeline and compression additions in the area.

On Nov. 21, 2019, FERC issued a certificate authorizing EPNG to build the South Mainline Expansion Project. Construction on the $140 million project began in early December. The project will increase capacity on the South Mainline system by 203 MMcfd by modifying and expanding portions of the system in Texas, New Mexico, and Arizona. It is expected to be placed into service in this year's third quarter.

Construction is nearly complete on the Sierrita Gas Pipeline Expansion Project. This project will increase the pipeline’s capacity by 323 MMcfd to 524 MMcfd, and consists of a new 15,900-hp compressor station in Pima County, Ariz. This project is expected to be placed into service in this year's second quarter. KMI is a 35% owner and the operator of Sierrita Gas Pipeline.

On Oct. 23, 2019, FERC issued Natural Gas Pipeline of America (NGPL) an environmental assessment for its proposed Gulf Coast southbound expansion project. The project will increase southbound capacity on NGPL’s Gulf Coast System by 300 MMcfd to serve Corpus Christi Liquefaction LLC. The project is supported by a long-term take-or-pay contract and is expected to be placed into service first-half 2021 pending regulatory approvals.

Construction is underway on the Sabine Pass Compression Project, expected to be placed in service late 2020. The project will add compression capacity on NGPL’s Louisiana system to deliver additional natural gas to the Sabine Pass Liquefaction plant in Cameron Parish, La.