Kinder Morgan to return El Paso line to service, serve LNG demand in 2023

Kinder Morgan Inc. completed repair work on Line 2000 of its El Paso Natural Gas pipeline system, asking U.S. regulators to lift pressure restrictions in a development that could help reopen a key western outlet for Permian Basin gas to Southern California demand markets.

Executives of the midstream giant stopped short of estimating when they expect to receive authorization from the U.S. Pipeline and Hazardous Materials Safety Administration to restart commercial service on Line 2000. Gas transportation capacity on the line has been restricted since an August 2021 rupture near Coolidge, Ariz., killed two people.

"It's going to take them some time to digest that and evaluate how fulsome that all is," said Thomas Martin, president of Kinder Morgan's gas group, during the company's Jan. 25 investor day. "But we feel good from the perspective of the work we have done, and we feel we have done well to meet the expectations and requirements" of the agency's corrective action order.

Martin's comments followed a notice posted the same day on El Paso's electronic bulletin board.

At the investor meeting, Kinder Morgan also highlighted expansion projects the company is pursuing. These include a 550-MMcf/d expansion of its Permian Highway Pipeline LLC and the Gulf Coast Express Pipeline LLC project, which are expected to enter service later this year to connect more Permian Basin gas to the U.S. Gulf Coast.

The company said it would have some $4 billion available in 2023 that it could use for capital projects, share buybacks or retaining on its balance sheet.

LNG market share

Kinder Morgan is evaluating some 9-Bcf/d worth of expansion projects to support feedgas demand growth for U.S. liquefied natural gas exports. The company will look to maintain its market share of delivering half of all feedgas supplies to U.S. LNG export facilities. Executives cited a projection that feedgas demand will more than double by 2030, with most of that growth in Texas and Louisiana. Kinder Morgan said it would pursue several modest gas pipeline expansion projects to support the export buildout.

"If someone else is willing to build a pipeline on spec or are willing to do it at a very low cost of capital, we're not going to compete with that," said Kinder Morgan President Kimberly Allen Dang, recently named to replace CEO Steve Kean when he steps down from the role in August. "But, given the pipeline network that we have, we should be able to provide cheaper alternatives where we can build off our existing system than new-build capacity, in many cases. So we are in a very good position for the LNG growth."

The company has contracts to move about 7 Bcf/d of U.S. feedgas across five pipelines and has signed contracts covering another 3 Bcf/d for export facilities that it expects to come online by 2025.

Expansion projects

Kinder Morgan anticipated that the Haynesville Shale and Permian Basin production provinces would be the main sources of natural gas for U.S. LNG export projects that are expected to come online in the U.S. Gulf over the coming years. Kinder Morgan cited a projection of 20 Bcf/d of U.S. gas supply growth between 2022 and 2030. Half of these volumes are expected to come from the Permian Basin, with the Haynesville representing the second-largest growth province.

The biggest project in Kinder Morgan's $3.3 billion committed capital backlog is a $678 million expansion project expected to add 2 Bcf/d in takeaway capacity on its Tennessee Gas Pipeline Co. and Southern Natural Gas Co. LLC systems, with additional feedgas aimed at Venture Global LNG's Plaquemines LNG export project under construction in Louisiana. New projects that Kinder Morgan decided to pursue in 2022 amounted to about $2.4 billion.

The next biggest item in the backlog is a $283 million Eagle Ford transportation project focused on debottlenecking the company's intrastate system in Texas. The project is expected to enter service in late 2023. The third biggest is $265 million worth of enhancements to the company's KinderHawk gathering system in the Haynesville.

Kinder Morgan said the volumes of natural gas it transports have increased by more than a third in the last seven years to 41.5 Bcf/d in 2022, in line with the overall growth in gas demand in the U.S.

"Now, for sure we have added capacity during this timeframe," Dang said. "But if you look at many of our long-haul systems, they are very highly utilized, and what you see on peak days is that we have constraints."

S&P Global Commodity Insights reporter Corey Paul produces content for distribution on Platts Dimensions Pro.