Once relegated to auction block status, Kinder Morgan’s MidConTexas Pipeline (MTP) continued its revival last week by renewingits gas sales and transportation contract with Reliant EnergyHL&P through March 1, 2004. Additionally, MTP has entered intoa new transportation services agreement with Reliant EnergyHL&P beginning in 2002 and extending through 2012.

No details about the contracts were disclosed. Larry Pierce, aKinder Morgan spokesman, said Reliant Energy HL&P, whichprovides electric service to approximately 1.6 million customers inthe Houston area, is one of the largest customers on MTP, but hecould not say what the pipeline’s current level of allocatedcapacity is.

Richard D. Kinder, CEO of Kinder Morgan, said the natural gassales and transportation contracts represent another step in KinderMorgan’s “back to basics” strategy to focus on its core pipelinebusinesses. “MidCon Texas Pipeline is a valuable asset that servesa variety of customers in Texas. We are very pleased with theselong-term contracts.”

Kinder Morgan is no stranger to large pipeline contracts. Since themerger between KN Energy and Kinder Morgan last year, the company hasbeen very aggressive in signing customers to its under-allocatedpipelines. This strategy is evident in the actions of Natural GasPipeline of America, which has inked a major renewal with Nicor Gas(see Daily GPI, Oct. 1) and a long-termdeal with Aquila for 500,000 MMBtu/d (see Daily GPI, Sept. 28).

Interestingly, MTP is one of the few Midcontinent assets peggedfor the auction block by Kinder Morgan that hasn’t been sold. WhenKinder Morgan purchased KN Energy Last year, Kinder made no secretof his desire to trim the fat off the new company, including MTP.

“Originally, it was named as an asset we wanted to divest,”Pierce said. “However, there was a change of strategy after therest of the divestment program went so well. Frankly, we didn’tthink we could sell the assets as successfully as we did. Becausethat program went so well, we were able to take another look at MTPand we realized that it has growing value.”

Last month, Kinder Morgan sold a plethora of Midcontinent assetsto Oneok for $114 million including all of Kinder’s gas gatheringand processing businesses in Oklahoma, Kansas and West Texas. MTP,however, was not part of that package. After the Oneok sale, Kindersaid the divestiture program was 80% complete.

Kinder Morgan, (then KN Energy) bought the MidCon pipeline in1997, when it merged with MidCon Corp. The 2,600-mile pipeline hadan operating income of 16.6 million last year as opposed to $2.1million in 1998. It sold 1.6 Bcf/d and produced 5,500 b/d of NGLlast year as well. The intrastate line provides bundled sales andtransportation services to major utility customers along the TexasGulf Coast and to industrial customers in the Houston and theGolden Triangle area of Texas.

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