Kinder Morgan Inc. CEO Rich Kinder didn’t see the shale revolution coming, not for U.S. natural gas, nor for crude oil, the CEO confided at the IHS CERAWeek conference last week during a discussion with IHS Vice Chairman Daniel Yergin.

“The first indication we had was obviously in the Barnett [Shale], probably 2005-2006,” Kinder said. “Certainly, I didn’t see it as big as it was going to become. I remember having lunch with the CEO of a large upstream company here in Houston, and he said, ‘We’re going to be able to do with fracking and horizontal wells in the oil area just like we’ve done in natural gas.’ I…said, ‘Well you know that would really be big,’ but I didn’t understand the ramifications. I don’t think many of us in this room did.”

Shale natural gas and oil have changed quite a lot about the North American energy patch. And the evolution is continuing. With the decline of commodity prices, midstream infrastructure projects are now being pulled by the market rather than pushed by producers, as they were back in the days of $100/bbl oil, Kinder said.

Kinder Morgan has signed up its share of customers among producers, though. The Kinder Morgan Crude and Condensate Pipeline in Texas was designed for about 300,000 b/d, Kinder said. The project originates in the Eagle Ford and carries production to the Texas Gulf Coast. At the beginning of the project about three and a half years ago, the company only had 50,000 bbl committed to the project, which was enough to provide “a reasonable return.”

Since then, Kinder said, the Crude and Condensate line has gone from a $200 million project to a billion dollar project and soon will be fully contracted for 300,000 b/d. “All that’s grown up really just over the last 24 months,” Kinder said.

These days, producers are less willing to commit to contracts with commodity prices being so low, Kinder said. However, the market end of the pipe has been more willing to step up for capacity, he said, prompted by low commodity prices. “You’ve had this whole reordering of chairs, and the key for the midstream, I think, is to be relevant by connecting the supply with the demand…

“We’re in kind of uncharted territory right now because the collapse in crude prices is so recent, relatively speaking. Certainly, in the Eagle Ford we’re still finding an awful lot of opportunities there. I think the Permian, just because of the different producing horizons, has a long way to go to be developed, and of course the Marcellus/Utica…today is producing as much natural gas as the country of Iran does, which has the second-largest gas reserves in the world, about 16 and a half Bcf/d.”

The Marcellus/Utica has been powerful enough to remake Kinder Morgan’s Tennessee Gas Pipeline system. Three of the system’s four large-diameter pipelines running from the Gulf Coast to the Northeast have changed direction to move supply out of the Marcellus region, Kinder said. The company wants to abandon the fourth pipeline for conversion to natural gas liquids service.

“This is the future,” Kinder said, adding that in Pennsylvania there will be null points from which on any given trading day, some gas flows north on the Tennessee system and some gas flows south.

On the crude oil side, there is room for rail transport of product, and tanker cars aren’t just a poor man’s pipeline as they offer optionality that pipelines can’t, Kinder said. This is particularly important when oil prices are volatile.

“When you have the kind of volatility that you have in crude prices in North America today, I think you’re going to see, both on the supply side and the demand side, a preference for having part of their supply move out by rail,” Kinder said. “I don’t know what that is, 10 or 20%…

[W]ith rail you don’t have to make as long a term commitment and you have more optionality to take into account the volatility of pricing it. If one day you want to move it to Baton Rouge and the next day to LA, you can do that. I think rail has a part but in the long run but I think pipelines are and will be the preferred method of moving crude.”