December 10, 2018 [S&P Global Platts] - Kinder Morgan stuck Wednesday to its latest startup target for the LNG export terminal it is building in Georgia and said it heads into 2019 expecting a boost to volumes across its North American transportation and storage network.
CEO Steve Kean’s webcast comments at Wells Fargo’s Midstream & Utility Symposium in New York reflect the competitive advantage the operator sees from being able to leverage growth from strong demand for feedgas and pipeline deliveries from Texas shale plays to Mexican power plants.
Kinder Morgan supplies 42% of the current US liquefaction capacity with feedgas that moves through its pipelines, and it is hoping to increase that market share as more terminals come online, including its Elba Island facility near Savannah in the first quarter of next year. Contract renewals have been robust, as has been the ability to command higher rates, Kean said.
“We are benefiting from the growth in both supply and demand, on both ends of our system,” Kean said. Those trends are also aiding growth efforts by other players in the US midstream sector. Enterprise Products Partners said in a presentation at the Wells Fargo forum that it sees opportunities to add additional natural gas processing plants, and to expand existing and build additional NGL fractionators.
Earlier this week, Kinder Morgan issued some of its financial projections for next year, based on its expectation of average annual prices for West Texas Intermediate crude oil and Henry Hub natural gas of $60/b and $3.15/MMBtu, respectively. Among other things, the Houston-based company said it will invest $3.1 billion in expansion projects and contributions to joint ventures in 2019.
Kinder Morgan has proposed two gas pipelines to boost takeaway capacity from the Permian Basin in West Texas, to demand centers, including the Texas Gulf Coast. Permian Highway Pipeline will be designed to transport up to 2 Bcf/d of from the Waha area to the Gulf and Mexico markets. Gulf Coast Express is a 1.98 Bcf/d project.
Kean said forecasts showing continued strong demand in Mexico for US supplies of natural gas are good news for Kinder Morgan, which is positioned to capitalize on the growth, with its existing network and planned projects.
“We’ve made a lot of money in Mexico without being in Mexico,” he said.
MARKET FUNDAMENTALS
On the US East Coast, Kinder Morgan is confident that it has mitigated challenges that forced it in October to again delay the startup of its LNG terminal project. In July, Kinder Morgan pushed Elba’s expected initial in-service to the fourth quarter of this year from the third quarter previously. Now, it doesn’t anticipate the first of 10 liquefaction units to come online until the first quarter of 2019.
“We have a delay, but I think we are going to be alright from a cost perspective,” Kean said.
Time lines aside, LNG market fundamentals remain strong, even amid trade tensions that have invited a degree of uncertainty.
“Significant LNG supply is expected to come online between 2018 and 2023 (~112mtpa), with demand continuing to keep pace with new supply,” Wells Fargo Securities analysts including Michael Webber said in a research note Wednesday after the industry symposium. “While China has been a significant demand driver in the past 12 years, ~80% of demand growth is forecasted to be broad-based, with Europe/South East Asia projected to be major drivers in the next 6-7 years.”
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