Kinder Morgan Eagle Ford Infrastructure Updates

January 23, 2012 R.T. Dukes

Kinder Morgan provided an Eagle Ford pipeline and midstream update in its quarterly call last week. The company realized better results in relation to it's pipeline and gathering network in the Eagle Ford, while staying on target to complete a $220 million condensate pipeline that will terminate in the Houston Ship Channel. Kinder also announced a $130 million condensate processing facility in Galena Park, TX, that will have capacity of 25,000 b/d initially (potential for 100,000 b/d). Quotes below:

Natural Gas Pipelines:

....In the quarter, Rockies Express Pipeline produced improved results due to a property tax settlement, equity income from the Eagle Ford Gathering and EagleHawk Field Services joint ventures increased due to higher volumes, and Kinder Morgan Treating benefited from the SouthTex and Gas Chill acquisitions. “Growth for the year versus 2010 was attributable to contributions from the KinderHawk and EagleHawk acquisitions, Fayetteville Express Pipeline, commencement of commercial operations of Eagle Ford Gathering, increased revenues from the Midcontinent Express Pipeline expansion, and improved gathering results due to favorable processing spreads on Casper-Douglas and increased volumes at Red Cedar,” Kinder said. Results for both the quarter and the year were impacted by lower results from the Trailblazer and KMIGT pipelines.

$350 Million in Eagle Ford Condensate Pipeline Infrastructure

Kinder is investing approximately $130 million to build a petroleum condensate processing facility near its Galena Park terminal on the Houston Ship Channel. The initial throughput capacity of 25,000 barrels per day (bpd) is being supported by a fee-based contract with a major oil customer, and the plant can be expanded up to 100,000 bpd. The company will own and operate the plant, which will split condensate into its various components. It is expected to be in service by January of 2014.

The location of the facility, when combined with Kinder Morgan’s previously announced $220 million crude/condensate pipeline, will provide customers with unparalleled connectivity to crude oil and clean products markets on the Texas Gulf Coast. The crude/condensate pipeline will transport product from the Eagle Ford Shale in south Texas to the Houston Ship Channel. It will consist of almost 70 miles of new-build construction and 113 miles of converted natural gas pipeline. Construction of the pipeline continues and the company expects it to begin service in the second quarter of 2012.

Eagle Ford Gathering

Eagle Ford Gathering, a joint venture between KMP and Copano Energy in south Texas, executed interruptible service contracts with several producers totaling more than 90,000 MMBtu per day, of which over 21,000 MMBtu per day will convert to long-term firm contracts when the joint venture’s processing capabilities increase in the second quarter of 2013. The joint venture also completed its delivery facilities to the Formosa Point Comfort processing plant in Jackson County and expects to initiate flow to Formosa in February 2012.

The joint venture has about 400 miles of pipelines (including its capacity rights in certain KMP pipelines) with capacity to gather and process over 700,000 MMBtu per day. Including its 50 percent equity interest in Eagle Ford Gathering and its 25 percent interest in EagleHawk Field Services (and excluding the crude/condensate pipeline), this segment has committed approximately $400 million to expansion projects in the Eagle Ford Shale.

Read the entire press release at KinderMorgan.com

Copano and Magellan Plan Eagle Ford Condensate Line to Corpus Christi

December 27, 2011 R.T. Dukes

Copano Energy and Magellan Midstream are planning a midstream joint venture (Double Eagle Pipeline LLC) that will construct almost 150 miles of pipe to deliver condensate to Magellan's Corpus Christi marine terminal. Eagle Ford pipeline and midstream capacity will get a boost of 100,000 bbls/d when the system comes online. The system will also include a truck unloading facility near Three Rivers, TX. The two companies will also make improvements to existing facilities. Copano will convert a 50-mile natural gas pipeline to condensate and Magellan will add 500,000 bbls of storage at the Corpus Christi terminal.

Statoil and Talisman Energy who have joint development in the Eagle Ford are the primary shippers

"Magellan looks forward to joining forces with Copano for this project that provides significant strategic value for both parties and our customers," said Michael Mears, Magellan's president and chief executive officer. "Combined, we are able to provide an attractive option for shippers to deliver petrochemical quality Eagle Ford condensate for use in Corpus Christi or higher-valued Texas markets via Magellan's marine capabilities."
"This project represents the next logical step in Copano's strategy of offering a full set of midstream services to Eagle Ford Shale producers and we look forward to working with Magellan on this opportunity," said R. Bruce Northcutt, Copano's president and chief executive officer. "By combining Copano's pipeline assets with access to Magellan's terminal at Corpus Christi, the joint venture will be able to leverage existing infrastructure and provide producers timely access to market alternatives at very competitive rates. The joint venture will continue to look for ways to expand the project and capture other condensate and oil-related growth opportunities in the Eagle Ford Shale play."

Read the entire press release at copanoenergy.com

Exporting Eagle Ford Gas is One Step Closer

December 26, 2011 R.T. Dukes

Cheniere Energy announced the week before Christmas that it has plans for a Texas natural gas export facility near Corpus Christi and that it reached a supply agreement with an Indian company for gas exported from the Sabine Pass export terminal in Louisiana. Through its Corpus Christi Liquefaction subsidiary, the company began the regulatory process for getting approval to add a 2 Bcf/d export facility in the La Quinta Channel on the Northeast side of Corpus Christi Bay in San Patricio County, TX. An export facility where operators can lock in higher gas prices for extended periods would expand commercial development of the Eagle Ford further into the dry gas window.

Cheniere Energy also added a supply agreement at its Sabine Pass facility. The company and GAIL Limited have agreed to a 20 year deal where the Indian company will purchase 3.5 mtpa or close to 500 mmcfd of gas at a price indexed to Henry Hub. The contract begins with the first commercial delivery.

GAIL signed an Eagle Ford JV agreement with Carrizo in September of 2011 and the deal with Cheniere is a big step in ensuring the company realizes better natural gas prices.

The Eagle Ford is largely supported by liquids (condensate, oil, NGLs) production, but better gas prices could open up the dry gas window to higher levels of development.

(Development) at one of Cheniere's existing sites that was previously permitted for a regasification terminal. The LNG export terminal site is located in San Patricio County, Texas, and it is anticipated that the terminal would be primarily supplied by reserves from the Eagle Ford Shale, located approximately sixty miles northwest of Corpus Christi. The proposed liquefaction project ("Corpus Christi Project") is being designed for up to three trains capable of producing in aggregate up to 13.5 million tonnes per annum ("mtpa").

Eagle Ford Condensate Processing Expansion - Houston - Kinder Morgan

December 15, 2011 R.T. Dukes

Eagle Ford condensate processing is set to expand by 25,000 b/d with the announcement of a new Kinder Morgan processing facility in Galena Park, TX. The plant will be positioned well to reach Gulf Coast industrial markets and the Houston Ship Channel. The $130 million facility will split condensate into its components: light and heavy napthas, kerosene, and gas oil. The plant will also have the capability to expand to 100,000 b/d.

“The location of our new facility, when combined with our recently announced $220 million crude/condensate pipeline, will provide customers with unparalleled connectivity to crude oil and clean products markets including refineries, chemical companies, gasoline blenders, finished product storage, outbound pipelines and marine facilities on the Texas Gulf Coast,” said KMP Products Pipelines President Tom Bannigan. The transaction is expected to be immediately accretive to cash distributable to KMP unitholders upon the project’s completion in January 2014.

The pipeline, which will transport crude/condensate from the Eagle Ford Shale in south Texas to the Houston Ship Channel, will consist of almost 70 miles of new-build construction and 113 miles of converted natural gas pipeline. Construction on the pipeline began this week and Kinder Morgan expects it to be in service in the second quarter of 2012.

TexStar Pipeline Open Season Begins

December 14, 2011 R.T. Dukes

TexStar Midstream began on open season for a 110 mile crude pipeline in South Texas on December 12, 2011. The 100,000 b/d pipeline will move crude and condensate from Gardendale to Oakville, near Valero's Three Rivers refinery. The company will then move volumes down to Corpus Christi through a NuStar pipeline. The project could be online as soon as mid-year 2012 and will be the first major pipeline and midstream expansion bringing oil to the coast.

In Corpus Christi, the oil will be able to be loaded on an ocean-going barge which can carry between 100,000 to 150,000 barrels or small ship carrying 300,000 barrels and sent up along the coast to Houston's refinery row.

The expected terminus will eventually ending up further east along the Gulf Coast at the oil hub of St. James, Louisiana.
Monroe said that TexStar expects to get enough firm commitment for five years of transportation to make the project work as production from the Eagle Ford is expected to rise from about 200,000 bpd now to as much as a million bpd in 2016.
"There is incentive for shippers. We also expect to have walk-up shippers paying a walk-up tariff, which is a fairly common strategy," said Monroe.