Kinder Morgan Energy Partners L.P.
) unveiled plans for the expansion of its proposed Trans Mountain
pipeline in order to cope with growing demand from the producers.
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Kinder Morgan -- the largest pipeline operator in the U.S. --
said that it intends to expand the size of its Trans Mountain oil
pipeline in Canada by almost 19% to 890,000 barrels a day (BPD)
from the previously proposed 750,000 BPD. However, the current
capacity of the pipeline, carrying oil from the Edmonton area
through the Lower Mainland to a marine terminal at Burnaby, is
300,000 BPD. In 2012, Kinder Morgan first proposed to increase
the capacity to 850,000 BPD, and subsequently cut the level to
750,000 in May 2012, as certain supporters left.
It has received commitments from 13 customers that have entered
into 15-20 year contracts for 700,000 barrels a day of oil to be
delivered through the Alberta-to-Burnaby pipeline.
Of them, Canadian Natural Resources Ltd., Canadian Oil Sands
Cenovus Energy Inc.
Devon Energy Corporation
) Canadian unit - Devon Canada Corp., Imperial Oil Ltd.,
) Canadian affiliate - Statoil Canada Ltd, and the marketing
Suncor Energy inc.
) and BP Canada -
) Canadian unit are worth mentioning.
Kinder Morgan aims to file its application to build the project
in late 2013. Upon approval, the new Trans Mountain pipeline is
expected to be operational in 2017. This latest expansion
represents a capital outlay of Canadian $5.4 billion (US $5.5
billion), up by US$1.3 billion from the previous cost of the
expansion project of US$4.1 billion.
The Trans Mountain project stands as the second most important
one aimed at delivering the Canadian crude oil to Pacific Rim
) C$6 billion ($6.1 billion) Northern Gateway project and
) Keystone XL project have faced delays due to the environmental
Kinder Morgan's Trans Mountain pipeline expansion is being
opposed by Vancouver and Burnaby municipalities as well as First
Nations. They raised concerns over the risks of an oil spill.
We maintain our long-term Neutral recommendation on the Kinder
Morgan units, supported by a Zacks Rank #3 (Hold).