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Kinder Morgan sees growth potential from gas storage network ties to grid, exports


700 Bcf of capacity strategically located in demand centers

Fixed fees increasingly preferred over commodity price risk

Kinder Morgan wants to leverage its US midstream infrastructure network to serve what it sees as a likely rise in natural gas storage demand to support power grid reliability and growing LNG exports, CEO Steve Kean said Sept. 9.

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The company, which moves through its pipelines more than a third of the natural gas consumed in the US and operates an East Coast liquefaction facility, has traditionally benefitted from its strategically located pipelines, which serve growing demand markets.

The Texas freeze disaster in February drew more attention to its gas storage capability, something it believes will become even more useful to the market in years to come, Kean said during a webcast presentation at a Barclays conference.

"We believe strongly that the demand for storage is going to continue to increase over time," Kean said. "We think that's been illustrated here with recent events. And these assets are sitting in a part of the country that needs that responsive storage."

The storage is flexible, in that it can serve summer and winter domestic needs, as well as support periods of high feedgas demand from LNG export terminals including Freeport LNG in Texas, Cheniere Energy's Sabine Pass in Louisiana and Sempra's Cameron LNG in Louisiana, Kean said.

"The 700 Bcf of storage capacity, and particularly our high deliverability storage capacity that we have in the state of Texas, is very helpful to those customers," Kean said.

He said Kinder Morgan has 4.4 Bcf already contracted, 1.7 Bcf still to come online. And, the company is in active discussions about another 2 Bcf to 5 Bcf of capacity.

"This is an important business for us. It's a growing business for us, and it helps us participate not just domestically, but participate globally with a risk profile that we like," Kean said. "We can make good money here without being exposed to global commodity market risk."

Limiting that risk is a key reason why Kinder Morgan has focused on its pipeline transportation and storage businesses and kept its liquefaction footprint small. It operates the Elba Liquefaction facility in Georgia, backed by a 20-year supply contract with Shell.

Kinder Morgan has not mentioned its proposed Gulf LNG project in Mississippi in recent investor presentations, including the one Sept. 9. Last year, the company said the fully permitted project was unlikely to be developed anytime soon.

"I think our strategy is really defined by the long-term strategic choices that we make, which is we're in the US energy, midstream, transportation and storage business, and how you contract for it," Kean said. "We contract largely on take-or-pay or fixed fee-based cash flows. We are pivoting to the low-carbon future with the investments that we're making."