Natural Gas Pipe Line Co. of America (NGPL) is the most cost-efficient gas pipeline to operate and maintain of the top 23 domestic pipes, according to a benchmarking study by Houston-based Lukens Energy Group. The study analyzed interstate pipeline companies and ranked them in terms of an operating and maintenance (O&M) cost-efficiency index on a scale of 0-10. NGPL, owned by Kinder Morgan Inc. (KMI), scored a 10.

According to the study, the other four most efficient pipes are Midwestern Gas Transmission Co., with an efficiency index of 7.7; Gulf South Pipeline, 7.6; Reliant Energy Gas Transmission Co., 6.5; and Mississippi River Transmission Corp., 6.1. The study is based on data submitted by the companies on 2000 Federal Energy Regulatory Commission Form 2.

The Lukens study differs from earlier benchmarking efforts in that it controlled for certain factors that effect O&M costs (exclusive of compressor fuel) on a per unit of throughput basis. Specifically, the Lukens Index controlled its calculations for several cost factors, including the following:

  • Population density in the states where the pipeline operates (i.e., it is more expensive to operate pipelines in densely populated areas).
  • Amount of installed compression horsepower per inch-mile of pipeline (i.e., it is more expensive to operate a pipeline that uses a lot of compression to move gas through small-diameter pipe than the same amount of compression on large diameter pipe.)
  • Amount of storage operated in conjunction with the pipeline (i.e., it is more expensive to operate pipeline systems that rely on storage).

“Our analysis bears out the adage that ‘necessity is the mother of invention,” said Jay Lukens, president. “All of the pipelines that rank high on our index operate in very competitive pipeline markets. The data show that the management of these pipelines have been resourceful in driving down operating costs in response to competitive pressures.” KMI CEO Rich Kinder said earlier this month that a planned expansion of the NGPL system in St. Louis is on schedule and budget, with the expansion expected to be completed this summer (see Daily GPI, May 14). The NGPL lateral will be ready in early 2003, he said.

NGPL reported segment earnings of $346.4 million in 2001, slightly higher than 2000, and $88.6 million for the fourth quarter. Kinder said “transportation and storage capacity remains virtually sold out on the pipeline and management continues to successfully re-contract capacity and enter into contracts for new electric generation load.” He said NGPL expects to connect between 3,000-4,000 MW of incremental gas-fired electric generation capacity a year through 2004.

For more information on the pipeline study, contact Lukens Energy Group at (713) 961-1100, or send an e-mail to gmorse@lukensgroup.com.

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