Kinder Morgan Energy Partners LP
(
KMP
) intends to double the planned capacity expansion of its Trans
Mountain pipeline in response to growing customer demand for
tapping new markets in the overseas.
The $5 billion worth project will boost the capacity of the
Trans Mountain line by about 550,000 barrels a day (BPD) from
300,000 BPD currently. The 1,150-kilometer (714-mile) pipeline
ships crude oil from Alberta to Vancouver, to reach the West Coast.
Alberta oil sands are expected to reach production level of 3
million barrels a day by 2020 and stands as the third largest crude
oil reserve worldwide. Hence, the latest expansion will permit
Asian purchasers huge volumes of Canadian crude in Vancouver for
shipment and then transportation across the Pacific. The project
also foresees expansion of the Trans' terminal in Vancouver,
enabling more tankers to preserve oil.
Importantly, this pipeline expansion is among the numerous
pipeline projects currently in process as Canadian oil producers
seek to hit the Asian markets and U.S. West Coast refineries that
offer good returns. Last year, only 1.65% of Canadian crude exports
were able to transport to markets outside the U.S. The producers
also aim to close the regional oil price discrepancy. The start-up
of the proposed project construction is expected in 2016 and be
over by one year.
Kinder Morgan's Trans Mountain will compete with
Enbridge Inc.
's (
ENB
) proposed 525,000 BPD Northern Gateway pipeline that is expected
to ship crudes of the oil sands to a deepwater port at Kitmat,
located on British Columbia's northern coast. However, Northern
Gateway has been facing hindrances from environmentalists and
aboriginal groups, delaying the project by more than a year.
Kinder Morgan Energy Partners is the largest independent owner
and operator of petroleum- product pipelines in the U.S. The
partnership is one of the largest publicly traded master limited
partnerships (MLPs) and generally serves as a benchmark for the
pipeline MLP group. Recently, the partnership intends to boost the
merchant storage capacity at its subsidiary Trans Mountain
Pipeline's Edmonton terminal by an additional 1.2 million barrels.
In this regard, Kinder Morgan Canada Terminals signed a long-term
agreement with a major Canadian producer for the construction of
the expanded facility.
The partnership, whose general partner interest is owned by
Kinder Morgan Inc.
(
KMI
), 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 our
Neutral recommendation on the stock.
ENBRIDGE INC (
ENB
): Free Stock Analysis Report
KINDER MORGAN (
KMI
): Free Stock Analysis Report
KINDER MORG ENG (
KMP
): Free Stock Analysis Report
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