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KMI, TrailStone Forming Mexico Gas Marketing JV

Kinder Morgan Inc. (KMI) said one of its subsidiaries has agreed to a joint venture (JV) with a subsidiary of TrailStone Group to form a Mexican company whose task will be to market natural gas to industrial users, power generators and others in the Monterrey area.

KMI said the JV would supply gas to the Monterey area using the national gas pipeline system, which is owned and operated by Mexico's Centro Nacional de Control del Gas Natural (CENAGAS).

According to KMI, the JV will be managed and operated by TrailStone. Pending regulatory approvals, the new company is expected to be operational by 1Q2016. KMI added that the JV partners "are actively pursuing and engaged in conversations with U.S. producers and end-users in Monterrey and customers connected to the Mexican national grid. The JV will provide these customers with a bundled natural gas supply package that can include Henry Hub or Houston Ship Channel-based pricing alternatives as well as swing and storage services."

The names of the subsidiaries were not disclosed. A spokeswoman for KMI told NGI on Monday that the partnership is currently envisioned to be a 50-50 JV.

Once the JV agreement has been executed and commitments to sell gas through the new marketing company have been finalized, KMI will begin expansion of its Mier-Monterrey pipeline, which runs 85 miles from the U.S.-Mexico border to Huinala, Nueva Leon, Mexico. According to KMI, the project will include adding compression and/or looping pipelines, and is expected to be completed by 4Q2017.

Once complete, the expanded Mier-Monterrey pipeline will be able to provide up to 200 MMcf/d of incremental capacity into the Monterrey area, but the system can be expanded up to an additional 500 MMcf/d if sufficient demand exists. Customers subscribing to capacity on the expansion will have access to Texas pipeline hubs and out-of-region supply via firm transport on KMI's existing Texas intrastate system. KMI said it will also expand its intrastate system to accommodate the desired capacity.

A binding open season was held last August on the expanded pipeline (see Daily GPIJuly 28). KMI Natural Gas Midstream President Duane Kokinda said the company had received interest from "numerous industrial and power generation consumers," and that plans for the expansion would move forward as it receives commitments.

"Potential customers will have options to subscribe for transport capacity on the expansion and source U.S. gas supply on their own, or contract with the JV to have natural gas delivered to their facility in Mexico," Kokinda said. "The proposed project utilizes existing rights-of-way and will expand upon our existing assets to provide a low-risk and low-cost option for additional capacity to transport natural gas produced in the United States to the growing industrial and power-generating markets in and around Monterrey, Nuevo Leon, and into Mexico's national grid."

The Mier-Monterrey pipeline is owned by Kinder Morgan Gas Natural de Mexico S. de R.L. de C.V., and has been in service since 2003 (see Daily GPI, March 26, 2003). The pipeline stretches from the border in Starr County, TX, to Monterrey, Mexico, and connects to a 1,000 MW power plant complex, as well as to Mexico's natural gas transportation system.

Mexico has enacted sweeping energy reforms under President Enrique Pena Nieto. Cross-border flows of natural gas from the United States to Mexico are growing as Mexico relies increasingly on gas-fired power generation (see Daily GPINov. 7, 2014).

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