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Kinder Morgan, TrailStone to Form Mexican Gas Company

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A subsidiary of Kinder Morgan Inc. has signed a joint venture letter of intent with a subsidiary of the TrailStone Group to form a Mexican natural gas marketing company.

The joint venture between the Kinder Morgan and TrailStone subsidiaries will combine North American gas supply and transportation to provide competitively priced gas supply to industrial markets and power generators in the Monterrey area and to other Mexican markets that can be accessed via the national system of gas pipelines to be owned and operated by CENAGAS, according to a Nov. 9 statement. The joint venture will be managed and operated by TrailStone and, subject to regulatory approvals, expected to be operational by the first quarter of 2016.

RELATED: U.S. Natural Gas Driving Investment on Texas-Mexico Border

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The companies involved in the joint venture are actively pursuing and engaged in conversations with U.S. producers and end-users in Monterrey and customers connected to the Mexican national grid. The joint venture will provide these customers with a bundled natural gas supply package that can include Henry Hub or Houston Ship Channel-based pricing alternatives as well as swing and storage services.

“The marketing company will provide a convenient and efficient option for end-users in the Monterrey area and other regions of Mexico to benefit from low cost U.S. natural gas under the new open access regulations that will become effective in Mexico in 2016,” said Larry Bell, Kinder Morgan Natural Gas Midstream vice president of marketing and transportation. “Pending signed agreements, the joint venture will market capacity allocated to a TrailStone subsidiary on Kinder Morgan’s Mier-Monterrey expansion.”

In addition, Bell said Kinder Morgan’s Texas Intrastate system will provide transportation, storage and gas supply services in the United States in support of the joint venture, and benefit from increased use of its existing assets.

“This joint venture is a significant building block in the expansion of TrailStone’s physical commodity trading and logistics platform,” said TrailStone CEO David Silbert. “We are excited to further develop our strategic relationship with Kinder Morgan, which is one of the most prominent and proven energy companies in North America.”

Pending execution of the formal joint venture agreement and commitments to sell gas through the Mexican marketing company, Kinder Morgan will commence its Mier-Monterrey expansion, which will consist of adding compression and/or looping the company’s existing Mier-Monterrey pipeline system from the U.S.-Mexico border to Huinalá, Nuevo León, Mexico.

RELATED: Kinder Morgan to Expand Mier-Monterrey Pipeline

The expansion is expected to be completed by the fourth quarter of 2017 and will provide up to 200 million cubic feet per day (MMcf/d) of incremental capacity into the Monterrey area. Kinder Morgan can further expand the capacity of the system by up to an additional 500 MMcf/d, if sufficient demand exists.

Customers subscribing to capacity on the additional expansion will have access to Texas pipeline hubs and out-of-region supply via firm transport on Kinder Morgan’s existing Texas intrastate system. Kinder Morgan will also expand its intrastate system to accommodate the desired capacity.

“We received interest in our binding open season from numerous industrial and power generation consumers and plan to move forward with the project as commitments are obtained,” said Kinder Morgan Natural Gas Midstream President Duane Kokinda. “Potential customers will have options to subscribe for transport capacity on the expansion and source U.S. gas supply on their own, or contract with the joint venture to have natural gas delivered to their facility in Mexico. The proposed project utilizes existing rights of way and will expand upon our existing assets to provide a low-risk and low-cost option for additional capacity to transport natural gas produced in the United States to the growing industrial and power-generating markets in and around Monterrey, Nuevo Leon, and into Mexico’s national grid.”

Kinder Morgan Inc. is one of the largest energy infrastructure companies in North America and owns an interest in or operates 84,000 miles of pipelines and approximately 165 terminals. Its subsidiary Kinder Morgan Gas Natural de México S. de R.L. de C.V. owns and operates the 85-mile Mier-Monterrey pipeline, which has been in service since 2003 and stretches from the International Border between the United States and Mexico in Starr County, Texas, to Monterrey, Mexico. The pipeline connects to a 1,000-megawatt power plant complex and to the national grid.

TrailStone Group is a global asset-backed commodities logistics and trading company, which is funded by Riverstone Holdings LLC. Since being formed in April 2013 by David Silbert, TrailStone has developed a logistics based commodities platform that is focused on oil and refined products, natural gas and power, metals and mining and agriculture. TrailStone has offices in London, Berlin, Sydney, Amsterdam, Austin and New York.

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