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KMI Cites Lack of Customer Support in Scrapping Plans for Appalachia NGL Pipeline

Kinder Morgan Inc. (KMI) has again scrapped plans to move natural gas liquids (NGL) from the Appalachian Basin to the Gulf Coast, noting customers showed little interest in the proposed Utica Marcellus Texas Pipeline (UMTP).

CEO Steven Kean said during the third quarter earnings call last Wednesday KMI is no longer pursuing the project, as “we haven’t gotten the customer sign up” needed to get it off the ground.

KMI launched an open season for the project in 2015. Last year, the Federal Energy Regulatory Commission approved the company’s request to abandon 964 miles of natural gas service on the Tennessee Gas Pipeline (TGP) to convert it and reverse northbound flows for NGLs.

The project would have cost roughly $4 billion and included building another 200 miles of pipeline from Louisiana to Texas. It would have added storage in Ohio and included 120 miles of laterals to provide basin connectivity. 

At the time of the Commission’s approval last year, a company spokesperson told NGI that the open season remained in its early stages but there was no timeline for work to begin on UMTP.

KMI plans to maintain natural gas service on the segment of TGP pipeline it was going to convert and instead pursue a reversal project to move Appalachian gas south to the Gulf Coast, where the market is now growing, Kean said. TGP is actively pursuing commercial arrangements for those reversed flows.

Kean added that despite improving prices in Appalachia, the idea is one of the last opportunities to reverse flows on a major interstate system in the region, which could prove attractive for some operators. It would also cost less than a greenfield pipeline. 

UMTP had been one of the largest Appalachian NGL projects announced at a proposed capacity of 430,000 b/d. The other major NGL projects in the region, Mariner East 2 and 2X, would move a combined 525,000 b/d of liquids to the Marcus Hook Industrial Complex near Philadelphia. However, the Mariner projects have yet to enter service nearly two years after one was scheduled to start-up. The project has been delayed indefinitely by various regulatory issues.

KMI launched a similar effort in 2013 to move liquids from Appalachia to the Gulf Coast that never evolved. The Bluegrass Pipeline was scrapped years ago by Williams and Boardwalk Pipeline Partners LP.

Meanwhile, stronger oil prices have incentivized more NGL production in the basin. BTU Analytics LLC said earlier this year it expects liquids production to grow by 80,000 b/d in 2018 and reach an exit rate of 680,000 b/d. Clearview Energy Partners LLC also noted in a recent analysis that NGL production in Appalachia had increased year-to-date through July to 663,000 b/d from 171,000 b/d in 2013. 

The majority of NGLs produced in the basin are transported via pipeline, truck and rail. More than 400,000 b/d of NGL pipeline capacity is already online in Appalachia. KMI earlier this year brought online the 215-mile Utopia pipeline to move 50,000 b/d of ethane and ethane-propane mixtures from Ohio to the petrochemical market in Ontario.

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