Kinder Morgan is proposing an expansion of its existing Trans Mountain pipeline system as strong oil producer demand and uncertainty of other similar pipeline projects remains strong

Analyst Commentary, Matthew Bovencamp: Continued demand for increased pipeline capacity from the Canadian oil sands to alternative destinations from Cushing Oklahoma in a bid to reduce the supply gut has prompted Kinder Morgan Energy Partners LP (NYSE: KMP) to propose an expansion of their existing pipeline from Edmonton to Vancouver. The proposed expansion would increase existing capacity from 300,000 bpd to 850,000 bpd. If the proposal is approved by regulators the pipeline would be operational by 2017. The pipeline would allow oil producers access to Asian economies, increasing competition for Canada’s resources. 

Kinder Morgan believes the pipeline will have a better chance of approval as the project plan is to increase capacity on an existing right of way. This contrasts to the proposed Northern Gateway pipeline which is planning to build a new pipeline through largely undeveloped areas of northern British Columbia and has been firmly opposed by First Nations and environmental activists.

There is clear incentive to divert crude from Cushing Oklahoma as Canadian oil sand crude is discounted due to the pipeline bottleneck. Opening the markets to Asian economies will not only increase competitive pricing of our crude but also allow increased production.

Source: Financial Post (Apr 12), Financial Post (Mar 29), Kinder Morgan


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