Kinder Morgan Mulls LPG, Product & Crude Exports

Maritime Activity Reports, Inc.

July 16, 2015

Kinder Morgan Inc is considering more export opportunities from Texas and the U.S. Northeast, including liquid petroleum gas, refined products and potentially crude, a top executive told analysts on Wednesday.

"The market is very ripe in Houston right now, it's just a matter of which product makes the most sense," John Schlosser, head of Kinder Morgan's terminals division, said during a quarterly earnings call.

Kinder Morgan already exports refined products and has increased its docks to 12 from four at its Houston Ship Channel complex. Those expansions accommodate nearby refiners seeking to increase exports.

U.S. petroleum product exports rose 500,000 barrels per day to an average of 4.1 million bpd in the first four months of 2015 compared with the same span last year, and 40 percent of the increase was gasoline, diesel and jet fuel, according to the U.S. Energy Information Administration.

Schlosser indicated Kinder Morgan is more interested in refined product export capacity than that for LPGs or crude, though all are under consideration.

LPG projects are "very profitable" and could compete with potential crude projects and other expansions, "but we see more opportunities on the clean side, more so than the other two," he said.

A decades-old ban prohibits domestic crude exports, but U.S. regulators allow exports of a very light form of crude known as condensate if minimally processed. Condensate makes up about half of Eagle Ford shale output in Texas, and is increasingly produced in other U.S. shale oilfields.

Kinder Morgan operates a 300,000 bpd pipeline that moves Eagle Ford crude and condensate to Houston. That line also is connected to the Kinder/Magellan Midstream Partners joint-venture Double Eagle pipeline that moves Eagle Ford condensate to Corpus Christi, Texas.

Kinder Morgan this month started up the second of two 50,000 bpd condensate splitters that split the very light crude into other components like naphtha, a building block for gasoline, and distillates. BP Plc has a 10-year agreement to buy all the output from both units.

Companies can export condensate with less sophisticated processing in smaller, cheaper stabilizers, which remove natural gas liquids, but don't make motor fuels.

(Reporting by Kristen Hays

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