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Vol. 18, No. 9 Week of March 03, 2013
Providing coverage of Bakken oil and gas

All aboard for Kinder Morgan

Pipeline giant Kinder Morgan has entered a joint venture to build the “first major crude by rail destination facility” in the Houston area — a 210,000 barrel-per-day project expected to come on line in the first quarter of 2014.

Kinder Morgan Energy Partners and Watco Co. LLC have struck a long-term agreement with Mercuria Energy Trading Co. to build the project at Greens Point Industrial Park on the Houston Shipping Channel.

The KW Express venture will open the way for Mercuria to source crude from various locations, including the Bakken shale area, Western Canada, Cushing, Okla., and West Texas.

The crude will be delivered by rail to the shipping channel for distribution to refineries by pipeline and barges.

It will have the capacity to unload and load up to three unit trains per day of crude oil and condensate as well as provide for up to 100,000 bpd of barge loading capacity.

KW Express will own 85 percent of the project and, along with Watco, construct and operate the facility once it is completed. Mercuria will own the remaining 15 percent.

Counting on continuing spread

Kinder Morgan Terminals President John Schlosser said the project will “provide U.S. and Canadian producers with much needed market access and optionality to deliver their crude oil production.”

Traders expect the crude-by-rail plan will count on a continuing wide price spread between Brent and West Texas Intermediate crudes that will offer an incentive to move WTI-priced crudes to the Gulf Coast.

But some analysts are withholding judgment pending the introduction of TransCanada’s 700,000 bpd Cushing to Nederland, Texas, pipeline and expansion of the Enterprise Product Partners-Enbridge Seaway line to 850,000 bpd, both scheduled to start service in 2014.

Mercuria was launched in 2004 and has become one of the largest integrated energy and commodity trading companies in the world. It trades from hubs in Geneva, London, Singapore, Shanghai, Chicago and Houston.

—Gary Park



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