Kinder Morgan Energy Partners L.P.’s (KMP) share price rose by 0.5% following the announcement that the partnership and its 50-50 joint venture partner, Imperial Oil Limited (IMO) had inked an additional firm take or pay agreement with strong, credit worthy oil company majors.
The agreements are adequate to take forward a planned expansion project by adding incremental capacity of 110,000 barrels per day (bpd) at Edmonton Rail Terminal. The project cost is approximately $232 million, including the addition of the expanded capacity.
The terminal, which has been under construction for almost a year now, is expected to have a capacity of over 210,000 bpd at start-up in the first quarter of 2015, which will likely move up to about 250,000 bpd eventually.
A pipeline will link the terminal to Kinder Morgan’s adjacent Edmonton storage terminal. Moreover, the terminal will be capable of sourcing all crude streams managed by the partnership for delivery by rail to North American markets and refineries. The rail terminal under construction, to be operated by Kinder Morgan, will connect to both Canadian National and Canadian Pacific mainlines.
The rail facility will be equipped with latest technology as well as extensive safety and environmental protection features. It will also employ trained personnel round the clock.
Kinder Morgan is the largest independent owner and operator of petroleum product pipelines in the U.S. Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide and other products, while its terminals store petroleum products and chemicals, and handle bulk materials such as coal and petroleum coke. It owns or operates more than 28,000 miles of pipeline and approximately 180 terminals.
Currently, Kinder Morgan carries a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas industry that are expected to perform well include Weatherford International plc (WFT), CNOOC Ltd (CEO) and Kosmos Energy Ltd. (KOS). All of these have a Zacks Rank #1 (Strong Buy).
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