Eagle Ford Oil Pipeline

Brian Hicks

Written By Brian Hicks

Posted June 5, 2013

Kinder Morgan Energy Partners, LP (NYSE: KMP) announced Monday it will expand its Kinder Morgan Crude and Condensate pipeline system (KMCC) into the Eagle Ford shale play in Karnes County, Texas.

The investment will cost approximately $107 million dollars and will be supported by the long-term contract the company has with ConocoPhillips (NYSE: COP).

pipelineIn total, the pipeline will stretch an additional 31 miles from the current 178-mile pipeline and run from the KMCC DeWitt Station in DeWitt County, Texas to the ConocoPhillips Central Delivery Facility in Karnes County, right outside the town of Helena.

The Houston-based pipeline and energy storage company will provide a more suitable outlet for the growing oil production coming out of South Texas and the Eagle Ford, where ConocoPhillips hauls oil and other hydrocarbons by truck from nearby wells.

Kinder Morgan is set to start the expanded pipeline this coming July. It first started service on the pipeline in June 2012.

Receipt tanks and a truck unloading facility next to ConocoPhillips’ Helena Central Delivery Facility was also part of the expansion announcement.

The expansion project adds to a March announcement that it will invest roughly $170 million to increase its Galena Park petroleum processing unit on the Houston Ship Channel.

It should be duly noted that just last Friday Kinder Morgan decided to cancel its plans for its upcoming $2 billion Freedom oil pipeline that would have carried a direct stream of West Texas crude to refiners on the West Coast.

This, according to Kinder Morgan, is a direct correlation to its shift in focus to crude-by-rail in both Texas and California. It also may reflect the growing difficulty to sell large-scale projects, as the industry in general seems to be making a shift to rail and shipping efforts.

From MarketWatch:

“We’re pleased we can expand our KMCC pipeline to provide additional flexibility to our customers seeking to move Karnes County crude and condensate to Houston-area markets,” said KMP Products Pipelines President Ron McClain. “This expansion further assists our commitment to deliver up to 300,000 barrels per day of crude and condensate from the Eagle Ford Shale.” The transaction is expected to be immediately accretive to cash distributable to KMP unitholders upon the project’s completion in the third quarter of 2014.

Kinder Morgan and ConocoPhillips

Kinder Morgan Energy Partners is general partner to and owned by Kinder Morgan Inc. (NYSE: KMI), among the largest energy companies and the biggest midstream enterprise in the U.S. Together, they operate and/or have interest in excess of 80,000 miles of pipeline and 180 terminals.

The approximate value of the two combined is $115 billion.

Its pipelines transport everything from crude oil to natural gas to gasoline down to CO2. In its storage terminals, you will find petroleum products and various chemicals, while also handling products like coal, coke, ethanol, and steel.

Kinder Morgan Inc. also has general partner interest in El Paso Pipeline Partners, LP (NYSE: EPB) and a limited partnership with Kinder Morgan Management, LLC (NYSE: KMR).

ConocoPhillips, partner to the latest Kinder Morgan endeavor, is also based in Houston, Texas and has interests throughout the world where it explores, produces, and transports all things gas and oil.

The Eagle Ford

At the heart of the Texan-based partnership is the Eagle Ford shale deposit, which shows results nothing short of astounding. It produces more than 500,000 barrels of crude oil each day – a number that is 77 percent greater than what it was showing little more than a year ago.

It extends from South Texas and into East Texas, with abundant crude supplies in its north and an equally generous natural gas supply to the south.

In 2012, 116,000 jobs were generated in the south alone, an area notorious for being destitute with opportunity.

But the Eagle Ford changed all that.

Now, many companies are moving in with a dead eye on crude oil. In addition to Kinder Morgan and ConocoPhillips some of those companies include EOG Resources (NYSE: EOG), Chesapeake Energy (NYSE: CHK), Marathon Oil (NYSE: MRO) and Anadarko Petroleum (NYSE: APC).

Chesapeake Energy Corp., which traditionally is known for its natural gas, has now extended its arm into Eagle Ford crude, scooping up some of the largest net acreage in the area – 485,000 acres.

After a swing downwards in the price of domestic natural gas and incurring rising costs, more focus will be put on Texas crude in the future for Chesapeake.

Texas is going to be extra hot this summer as work on all fronts heats up, especially for the KMCC and the Eagle Ford crude front.


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