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Kinder Morgan Commits to Northeast, Mexico Projects

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Kinder Morgan Energy Partners has announced agreements that support two natural gas transportation projects that will go into service by 2020. One is a Northeast Energy Direct project in New England, which is expected to be in service by 2018. The other is an increase in capacity on the El Paso Natural Gas Co. (EPNG) system to ramp up natural gas transportation to 550 million cubic feet per day (MMcf/d) to Mexico by 2020.

Kinder Morgan announced July 30 that it has reached agreement with local natural gas distribution companies (LDCs) throughout New England to transport approximately 500 MMcf/d of long-term firm transportation on Northeast Energy Direct, a project by Kinder Morgan subsidiary Tennessee Gas Pipeline (TGP) Co. The agreement includes Berkshire Gas Co., Columbia Gas of Massachusetts, Connecticut Natural Gas Corp., Liberty Utilities (EnergyNorth Natural Gas) Corp., National Grid, Southern Connecticut Gas Corp. and three other LDCs. Negotiations with additional customers on both the market path and supply path components of the Northeast Energy Direct project are continuing and agreements are expected to be announced soon, according to a company statement.

“We are extremely pleased to provide a key solution to New England’s long-term energy infrastructure needs,” said Kimberly S. Watson, president of Kinder Morgan’s Natural Gas Pipelines East Region. “Multiple studies continue to suggest there is a need for up to 2 billion cubic feet per day (Bcf/d) of new pipeline capacity into New England and neighboring markets, and the commitment by the LDCs represents a critical milestone in the development of TGP’s role in solving the need for new energy infrastructure.”

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Northeast Energy Direct has capacity scalable from approximately 800 MMcf/d to 1.2 Bcf/d, or ultimately up to 2.2 Bcf/d, depending on final customer commitments. Capacity will include a combination of new pipeline, existing pipeline, additional pipeline loops, new compressor stations, station modifications and metering and measurement equipment in Pennsylvania, New York, Massachusetts, Connecticut, New Hampshire and Rhode Island.

TGP plans to begin the pre-filing process with the Federal Energy Regulatory Commission in September 2014. Subject to receiving sufficient commitments for capacity as well as regulatory approval, the project is expected to begin service in November 2018.

As for the EPNG expansion to Mexico, Kinder Morgan announced July 31 that it has entered into a 21-year firm transportation agreement with Mexico’s Comisión Federal de Electricidad (CFE) to initially provide approximately 163 MMcf/d of firm transportation capacity by October 2014, ramping up to 200 MMcf/d by October 2017 and to 550 MMcf/d by October 2020.

The phased capacity increases will be accomplished using existing and expansion capacity on the EPNG system. As previously announced, capital expenditures are estimated at approximately $529 million.

Engineering and procurement activities have begun on the first phase of work, which involves system improvements to deliver volumes to the Sierrita Pipeline near Tucson, Arizona, by October. The second phase will result in incremental deliveries of natural gas to the Sierrita Pipeline and to California, and is expected to be completed by October 2020. The Sierrita Pipeline is expected to be in service by September.

“This firm transportation agreement will help CFE to realize its goal of converting numerous fuel oil-powered generation plants throughout Mexico to natural gas, as well as provide transportation for a number of new gas-fired plants currently under development,” said Kinder Morgan’s West Region Gas Pipeline president Mark Kissel.

The agreement provides for deliveries primarily to a new point of interconnection with the Sierrita Pipeline project along EPNG’s South Mainline and also to California.

Transportation service will be provided by utilizing existing capacity available on EPNG’s North Mainline, along with undertaking certain system upgrades to enhance deliverability to the South Mainline. In order to facilitate the full 550 MMcf/d of service, EPNG is planning an expansion that would consist of looping its Havasu Crossover line and installing new compression, as well as undertaking modifications at several existing compressor stations to facilitate west-to-east flow along the South Mainline.

This project is included in Kinder Morgan’s reported $15.4 billion backlog, and the associated volume was included in the 4.8 Bcf of executed and pending firm transport commitments described in the company’s second quarter earnings release.

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