Tuesday, April 10, 2012

Kinder Morgan enters into significant CO2 sales contracts

HOUSTON, Texas - Kinder Morgan Energy Partners, L.P. on April 4 announced it has entered into five new CO2 sales contracts during the first quarter that combined total more than two trillion cubic feet with aggregate daily contract quantities exceeding 440 million cubic feet per day (MMcfd) at their peak.

The volumes, the great majority of which is contracted by third-parties, will support new and existing CO2 flood projects operated by the purchasers in the Permian Basin of West Texas and have a volume weighted average term of nearly 16 years.

"CO2 continues to be in strong demand, as enhanced oil recovery operations are increasing in response to sustained higher oil prices," said CO2 President Tim Bradley. "As a result, we are realizing excellent opportunities to expand our CO2 operations and bring much needed supply to our customers."

Bradley noted that one of the contracts includes transporting CO2 via Kinder Morgan's 91-mile Eastern Shelf Pipeline to a project near the company's Katz Field. The contract will commence in 2014 and is expected to increase CO2 transported via the pipeline to more than 130 MMcfd, which will require additional pump stations to bolster capacity.

In response to increasing CO2 demand, Kinder Morgan is working on a previously announced $255 million expansion at its Doe Canyon Unit CO2 source field in southwestern Colorado to increase capacity from 105 MMcfd to 170 MMcfd. The expansion will include installation of both primary and booster compression with construction beginning in the second quarter this year. The primary compression is expected to be in service in the fourth quarter of 2013 and the booster compression is targeted to be complete in the second quarter of 2014. The company also plans to drill 19 more wells during the next 10 years, which will increase production from 105 MMcfd to 170 MMcfd.

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