KMI earnings fall on higher interest rates; operations contributions up

Kinder Morgan Inc.’s (KMI) net income for third-quarter 2023 was down 7.6% year-on-year, slipping to $532 million from $576 million. KMI attributed the softer earnings to higher interest expense. Financial contributions from the natural gas pipeline, products pipeline, and terminals business segments were all up relative to third-quarter 2022.

Chief executive officer Kim Dang described the future as “bright,” citing KMI’s expectation that natural gas demand would grow by more than 20% through 2028, led by LNG exports, pipeline exports to Mexico, and power generation. The company is adding 550 MMcfd of capacity to its 2.1-bcfd Permian Highway pipeline (PHP) and 6 bcf of incremental working gas storage at its Markham site on the Texas Gulf Coast.

KMI’s project backlog at the end of the third quarter was $3.8 billion, up from $3.7 billion in the second quarter. “With continued strong emphasis on our base business, we are also devoting roughly 84% of our project backlog to lower-carbon energy investments, versus 80% in the second quarter,” said Dang. Natural gas as a substitute for higher emitting fuels, producer certified natural gas, renewable natural gas (RNG), renewable diesel (RD), and feedstocks associated with RD and sustainable aviation fuel, were all included as lower-carbon investments.

KMI president Tom Martin ascribed the improved financial performance of its natural gas pipelines segment primarily to “higher contributions from [KMI's] Texas Intrastate system, Midcontinent Express Pipeline, and El Paso Natural Gas (EPNG), partially offset by lower contributions from our Eagle Ford gathering system assets.”

Natural gas transport volumes were up 5% compared with third-quarter 2022, primarily from increases on EPNG due to returning a pipeline to service and the retirement of a coal-fired power plant, and across other assets due to higher volumes delivered to power generation, LNG plants, and industrial customers. Natural gas gathering volumes were up 11% across most of KMI’s systems.

The company described the Permian Highway expansion as “nearly complete,” with an expected in-service date of December 2023. PHP is jointly owned by subsidiaries of KMI, Kinetik Holdings Inc., and Exxon Mobil Corp. KMI is the pipeline’s operator.

The Markham Storage expansion project Matagorda County, Tex., involves adding a new cavern leased from a subsidiary of Texas Brine Co. LLC (OGJ Online, June 1, 2023). In addition to increasing incremental working gas storage, the expansion will add 650 MMcfd of incremental withdrawal capacity on KMI’s Texas intrastate system. Shippers have subscribed to most of the available capacity under long-term agreements, the company said, with commercial in-service expected first-quarter 2024. Markham currently has 21.8 bcf of storage and peak delivery of 1.1 bcfd.

Construction is also nearing completion on Kinder Morgan Tejas Pipeline LLC’s project to expand its Eagle Ford gas transportation system to deliver nearly 2 bcfd of Eagle Ford production to the Gulf Coast. As part of the project, Tejas is building a 67-mile, 42-in. OD pipeline from KMI’s existing Kinder Morgan Texas Pipeline compressor station near Freer, Tex., to the Tejas pipeline system near Sinton, Tex. The project is expected to be in service in November 2023.

On Sept. 8, 2023, KMI’s Tennessee Gas Pipeline (TGP) and Southern Natural Gas received US Federal Energy Regulatory Commission (FERC) authorization to begin building Phase 2 of the Evangeline Pass project, which will enable the pipeline systems to jointly provide an additional 1.1 bcfd of natural gas transportation capacity to Venture Global LNG Inc.’s proposed 20-million tonne/year Plaquemines LNG plant. Construction of Phase 1, which includes general operational upgrades allowing TGP to provide 900 MMcfd of gas to Plaquemines, is ongoing. The expected in-service dates for each phase will be aligned with Venture Global’s expected 2024-25 startup (OGJ Online, Jan. 19, 2023).