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Kinder Morgan content with keeping liquefaction footprint small for now

Highlights

Gulf LNG project unlikely to develop in near future: CEO

Contracting challenges and weak prices seen as risks

Houston — Kinder Morgan is not interested in building a new liquefaction project anytime soon with long-term contracting slow and prices in end-user markets weak, CEO Steve Kean said Wednesday.

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The comments during an annual investor conference amount to Kinder Morgan's strongest on the subject to date and reflect the company's conservative strategy with respect to spending its capital going forward. It prefers investments that provide stable fixed fees and little to no risk to global commodity prices.

That means further LNG export development for Kinder Morgan appears to be out for now. The company is content with the revenue it is receiving from Shell as the sole offtaker at Elba Liquefaction, its Georgia facility that shipped its first cargo in December. Kinder Morgan has space at the site to expand Elba if the economics worked for its investors and if Shell were interested, Kean said.

"The market for long-term contracting while securing our cash flow in a way that we like to contract and run our business with a lack of exposure to global natural gas prices, there really is not an existing opportunity," Kean said. "We would have to take more risk in order to be able to do that."

Asked about Gulf LNG, the Mississippi export project for which Kinder Morgan received Federal Energy Regulatory Commission approval in July 2019, Kean said the market situation is not right at the present time for making a positive final investment decision. That brownfield project would add liquefaction and export capabilities of up to 10.85 million mt/year to an existing import terminal near Pascagoula.

"I think that's just not a likely thing to develop in the near future," he said.

When Kinder Morgan released its latest financial results on January 22, it stuck to its target to spend less money this year on expansion projects than it did in 2019. Kinder Morgan said it would not be chasing expansion projects or acquisitions that don't meet a strict risk-versus-reward test. Instead it would focus on leveraging its vast North American network of midstream infrastructure and completing projects underway. The company said it would continue to serve demand for delivering feedgas to LNG terminals along the Gulf Coast and moving additional supplies across Texas and into Mexico.

"We're not going with the current fashion of the day, what everybody is talking about," Kean said during the investor conference.

He added, "We don't feel pressure to refill the backlog. We feel pressure to deploy our investors' capital wisely."

Kinder Morgan is betting on there being a long runway for natural gas growth, at home and abroad, Kean said. The company moves more than a third of the natural gas consumed in the US. When gas exported from the US is included, that total rises to 40%.

"Peak hydrocarbons, and particularly peak natural gas, is a long way out," Kean said. "Our network is extremely well situated, both on the supply and demand side."