LNG

As of January 25, the ‘monster winter storm’ Fern has severely impacted feedgas supply for US LNG exports, with restrictions on the Creole Trail pipeline reducing flows to Sabine Pass terminal. Freeport LNG might also go offline as ice is accumulating along its feedgas corridor. 

Kinder Morgan is adding $1.3 billion to its project backlog, with CEO Kim Dang calling 2025 “an incredible year for US LNG growth.” In Q2, the US pipeline operator generated $1.6 billion in cash flow from operations in Q2 based on a business model structured around long-term take-or-pay, fee-based gas delivery contracts.

Kinder Morgan Inc. (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure operator and developer, has issued increased financial forecasts for 2024.

Kinder Morgan Inc. (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, reported lower second-quarter net profits amid steady cash flow as it responded to volatile market conditions.

The company said profits declined to $586 million during the three months to the end of June from $635M in the second quarter of 2022.

“The KMI board and management team are fully committed to the use of our strong cash flow to benefit our shareholders,” said Executive Chairman Richard D. Kinder.

“We focus on maintaining a strong balance sheet while internally funding capital projects that produce returns well in excess of our cost of capital - including projects that are part of the ongoing energy evolution,” the Chairman stated,

KMI’s distributable cash flow amounted to $1.07 billion compared with $1.17Bln in the prior-year quarter.

Asset values

“KMI once again saw the value of its existing natural gas transportation and storage assets that are able to respond to volatile market conditions caused by extreme weather events and an increasingly intermittent resource-based electric grid,” said Chief Executive Steve Kean.

“Our 700 billion cubic feet of operated natural gas storage capacity is particularly useful in back-stopping intermittent renewable electricity resources,” Kean explained.

“Financial contributions from the Natural Gas Pipeline business segment were up relative to the second quarter of 2022 and ahead of budget,” added the CEO.

“Our Terminals business segment also over-performed relative to both the second quarter of 2022 and budget,” stated Kean.

KMI President Kim Dang said that the performance of the Natural Gas Pipelines business improved in the second quarter of 2023 versus the prior-year quarter.

Dang cited higher contributions from Midcontinent Express Pipeline, the Texas Intrastate system, El Paso Natural Gas (EPNG), the Stagecoach asset and the Tennessee Gas Pipeline (TGP), partially offset by lower contributions from the company's Eagle Ford gathering system assets.

Natural gas transport volumes were up 5 percent year-over-year, primarily from increases on EPNG due to returning a pipeline to service and the retirement of a coal-fired power plant.

Texas Intrastate

KMI said that the Texas Intrastate system benefited from a variety of existing shippers and new contracts, partially offset by reduced volumes on the Tennessee Gas Pipeline.

“Natural gas gathering volumes were up 19 percent from the second quarter of 2022 across most of our systems,” Dang explained. 

Among several new projects, KMI said that the two-phase $678M Evangeline Pass venture will include modifications and enhancements to portions of the TGP and Southern Natural Gas systems in Mississippi and Louisiana, enabling the delivery of the full FERC-certificated project volumes to Venture Global’s proposed Plaquemines LNG facility.

“Construction activities are underway for phase 1 of the project, which includes general operational upgrades enabling TGP to provide approximately 900 million cubic feet per day of natural gas transportation capacity to Venture Global’s facility,” said KMI.

Dang added that contributions from the Products Pipelines business segment were down compared with the second quarter of 2022, saying this was largely due to the impact in the prior-year period of sharply rising commodity prices.

“The crude and condensate business was also impacted by lower re-contracting rates in the Eagle Ford. Total refined products volumes were relatively flat compared to the second quarter of 2022,” Dang said.

US pipelines company Kinder Morgan and Howard Energy Partners have announced expansions of their Eagle Ford projects designed to deliver more LNG feed gas and domestic supplies to US Gulf Coast markets.

Kinder Morgan Inc. (KMI) the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, increased first-quarter net income and cash flow with more natural gas from the US Gulf Coast shale-gas basins.

The company reported first-quarter net income attributable to KMI of $679 million compared with $667M in the first three months of 2022.

Cash flow for the quarter from operations amounted to $1.33 billion versus $1.08Bln in the prior-year quarter.

“Our natural gas pipeline network is composed of some 70,000 miles of interstate and intrastate pipelines that move about 40 percent of US natural gas production, along with 700 billion cubic feet of natural gas storage, comprising 15 percent of total US natural gas storage capacity,” explained Steve Kean, KMI Chief Executive.

“While the US Congress debates much-needed infrastructure permitting reform, the system we operate under today makes it difficult to permit new natural gas pipelines in much of the country,” Kean stated.

Value added

“That in turn increases the value of our existing natural gas pipeline systems, which results in a favorable recontracting environment,” the CEO added.

“With a large portion of our existing natural gas pipeline network in Texas and Louisiana, we also benefit from our ability to expand to meet growing demand in the most infrastructure-friendly region of the country,” Kean said.

KMI said it was continuing to execute expansions of its existing natural gas pipeline systems.

“During the first quarter we made good progress on two such expansions. One will add approximately 550 million cubic feet per day of capacity to the Permian Highway Pipeline (PHP) system through additional compression with minimal new pipeline build,” said KMI.

“The other will increase capacity and reliability of services to Con Edison, a key business partner, by upgrading and adding compression facilities on the Tennessee Gas Pipeline (TGP) system in a critical region of the country,” the company added.

Gas gathering

KMI President Kim Dang gave an overview and praised the gas gathering systems for keeping the natural gas business on track.

“The Natural Gas Pipelines business segment’s financial performance was up in the first quarter of 2023 relative to the first quarter of 2022, primarily on higher contributions from our Texas Intrastate system, from Midcontinent Express Pipeline, from El Paso Natural Gas (EPNG) and from most of our gathering system assets,” explained Dang.

“Natural gas transport volumes were up 3 percent compared to the first quarter of 2022, primarily from increases on EPNG due to returning a pipeline to service, cooler weather, and the retirement of a coal-fired power plant,” she added.

“Natural gas gathering volumes were up 18 percent from the first quarter of 2022 primarily from our Haynesville and Eagle Ford systems,” Dang said.

Moody's Investors Service, the US credit ratings agency, said that increasing global demand for natural gas is a growth opportunity for US LNG producers, though delivery depends more on the timely construction of natural gas pipeline infrastructure to support new US LNG supplies.

Moody’s said in a research note than Europe's energy crisis, led by the cut-off of Russian supplies to Germany, should keep the LNG market tight until 2025-2026, supporting cash flow generation for US LNG producers.

The report also noted the potential recovery in Chinese domestic demand in 2023 that will bring more competition to the market.

“European demand might accelerate LNG capacity expansion in the US, but that would require long-term offtake commitments from European buyers, even as they are working to reconcile new energy security needs,” said Moody’s.

Most of the announced US LNG growth projects through 2025-2026 have long-term commitments from Asian buyers, the original source of the US LNG boom since the mid-2010s, and international commodity traders stepped up their LNG purchases in 2022.

However, LNG producers require long-term offtake commitments to underpin financing of new LNG infrastructure projects.

Capital allocation

The report stated that LNG projects should in turn spur further capital allocation for constructing new pipeline capacity to connect the largest US gas producing regions and new export infrastructure.

These new pipeline projects will need to win permitting approvals from the US Federal Energy Regulatory Commission.

“Today's peak nameplate capacity of nearly 14 billion cubic feet per day reflects only about one-quarter of the capacity of all announced LNG projects, including several with partial or full FERC approval and 10 bcf per day under construction,” the report added.

The LNG projects include the Corpus Christi plant expansion in Texas and the Port Arthur project as well as others on the Mississippi River and the Brownsville Ship Channel.

Moody’s noted that the Marcellus and Utica shale basins together contributed roughly one-third of US dry gas production, though limited pipeline takeaway capacity has constrained growth for those regions.

In the fourth quarter of 2022, US dry natural gas production stood at 100 bcf, exceeding year-earlier production by 3 percent.

Moody’s said that this was largely due to increased drilling and pipeline expansions in the Haynesville Shale and rising volumes of associated natural gas delivered by oil producers in the Permian Basin.

Several large US LNG projects now under construction will add significant new capacity by the mid-2020s.

Several of the US pipeline giants have already announced projects that will supply gas to LNG infrastructure. They include Williams Company’s Louisiana Energy Gateway, Energy Transfer’s Gulf Run and Kinder Morgan’s Permian Highway Pipeline expansion.

Kinder Morgan Inc (KMI), the leading US pipeline feed-gas company for liquefied natural gas plants and a key energy infrastructure developer, reported third-quarter net income of $576 million, up from $495M in the prior-year quarter, as the executive team forecast a continuing and deepening LNG boom on the Gulf Coast.

Blackstone Inc., a private equity fund based in New York, has purchased a 49 percent stake in the US Elba Island LNG export plant in Georgia where Shell is the only customers.

The American Gas Association (AGA) has condemned the Federal Energy Regulatory Commission’s new permit process for US natural gas pipelines, saying FERC’s policy change opens the way for emissions criteria to take precedence over the energy needs of ordinary Americans.