Kinder Morgan Plans $130M Facility

Houston-based Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report) plans to build, own and operate a petroleum condensate processing facility at a cost of about $130 million.

The new plant – located near Kinder Morgan’s Galena Park terminal on the Houston Ship Channel – is expected to have an initial throughput of 25,000 barrels per day (bpd). The processing facility will have a provision for future expansion of up to 100,000 bpd. It will be capable of splitting condensate into its various components such as light and heavy naphthas, kerosene, and gas oil, following its completion in January 2014.

The project’s initial throughput is to be underwritten by a major oil industry customer through a fee structure.

The partnership intends to integrate the new facility with the recently announced $220 million crude/condensate pipeline. The construction on the pipeline commenced this week and Kinder Morgan expects it to come online in the second quarter of 2012.

The integration will be able to offer customers with unique connectivity to crude oil and clean products markets, comprising refineries, chemical companies, gasoline blenders, finished product storage, outbound pipelines and marine facilities on the Texas Gulf Coast. This is anticipated to be immediately accretive to cash distributable to Kinder Morgan’s unitholders.

The pipeline includes nearly 70 miles of newly constructed and 113 miles of converted natural gas pipeline that will carry crude/condensate from the Eagle Ford Shale in south Texas to the Houston Ship Channel.

The pipeline project is another effort to exploit the light, sweet Eagle Ford shale oil formation to link between the field and the refineries along the U.S. Gulf Coast, thereby substituting more expensive crude imports.

Kinder Morgan holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the partnership. Kinder Morgan Inc. (KMI - Analyst Report), one of the largest mid-stream energy companies in the U.S., owns the partnership’s general partner interest.

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