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Kinder Morgan Subsidiaries Get FERC Permit for $2B Project
Kinder Morgan Inc.’s (KMI - Free Report) subsidiaries, Elba Liquefaction Company, L.L.C. (ELC) and Southern LNG Company, L.L.C. (SLNG), have received authorization for their $2 billion Elba Liquefaction Project from the Federal Energy Regulatory Commission (FERC).
The project will be constructed and operated at the existing Elba Island LNG Terminal near Savannah, GA. As announced earlier, the first of the 10 liquefaction units will likely be commissioned in the second quarter of 2018, while the remaining nine units will become functional before the end of 2018. This project is backed by a 20-year contract with Royal Dutch Shell (RDS.A).
In 2012, the Department of Energy permitted the Elba Liquefaction Project to export to Free Trade Agreement (FTA) countries. Though ruling on the export to non-FTA countries is pending, the progress of the project is unlikely to be hindered.
The liquefaction project is estimated to have a total capacity of about 2.5 million tons per year of LNG for export. This is equivalent to about 350,000 Mcf per day of natural gas.
Kinder Morgan is one of the largest midstream companies in North America. We believe that the company’s size will prove to be advantageous with opportunities to build smaller adjacent pipelines at a lower cost than peers. Further, an increased demand for power generation and exports are expected to drive continued infrastructure build-out for the company in the coming quarters. Such positives are likely to boost future earnings as well.
Kinder Morgan’s significant efforts to reduce costs and restrict capital expenditures to only those projects that offer high returns should improve margins and partly offset the low commodity price environment.
Currently, Kinder Morgan carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the oil and gas sector include CVR Refining, LP , Murphy USA Inc. (MUSA - Free Report) and Braskem S.A. (BAK - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
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