It’s deja vu all over again as Kinder Morgan floats a proposal to convert a 635-mile Wyoming to Missouri section of its former Pony Express Pipeline from natural gas back to its original function of carrying crude oil. Chalk it up to the booming oil development in the Bakken and the Denver-Julesburg/Niobrara shales and a shrinking demand for Rockies gas in the East.

The company is responding to the growing need for crude oil transport capacity, John Eagleton, vice president of business development for Kinder Morgan’s West Region Pipeline Group, told a Denver audience Thursday. “DJ/Niobrara production is increasing and significant Bakken production growth is projected.”

Existing oil pipeline capacity is maxed out to the point where more expensive railroad and truck transportation is being used, Eagleton said at the 23rd annual natural gas strategy conference of the Colorado Oil & Gas Association.

The converted line would run from Guernsey, WY, to Freeman, MO, just south of Kansas City. The project would include a new line connecting to the west-to-east pipeline in Kansas and running south 210 miles to the oil hub at Cushing, OK. The proposal calls for a crude oil design capacity of 220,000 b/d.

Pony Express was originally built as an oil pipeline, but it was converted to carry up to 255 MMcf/d of natural gas out of the Rockies to a connection with Natural Gas Pipeline Company of America (NGPL) and Midwest markets in 1997 (see NGI, March 9, 1998). The original 800-mile-plus line currently is integrated into Kinder Morgan Interstate Gas Transmission LLC.

However, the Pony Express route to the East has since been dwarfed by the 1,679-mile, 1.8 Bcf/d Rockies Express Pipeline, 50% owned and operated by Kinder Morgan and completed from Colorado into Ohio in mid-2009. Along with that, increasing volumes of Marcellus Shale output, needing little transportation, are cutting into the eastern market.

At this point, the company has not made any definitive decisions and is looking to gauge shipper interest. Kinder Morgan will be talking with oil producers, refineries and aggregators and is looking to get anchor shippers on board before going out with an open season this fall.

Eagleton said if the conversion is made, Kinder Morgan will provide alternate transportation for current natural gas shippers on the line.

If the plan goes through, Kinder Morgan expects to complete the project in 2014, which would coincide with the completion of southbound crude oil expansions from Cushing to the Gulf Coast. The company points out that converting a line is faster and cheaper than building a new one.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.