Kinder Morgan, TrailStone form joint venture to sell natural gas in Mexico

A subsidiary of Kinder Morgan Inc. (NYSE: KMI) on Nov. 9 announced it has signed a joint venture (JV) letter of intent (LOI) with a subsidiary of the TrailStone Group to form a Mexican natural gas marketing company.

The JV between KMI and TrailStone subsidiaries will combine North American gas supply and transportation to provide competitively priced gas supply to industrial markets and power generators in the Monterrey area of Mexico and to other markets that can be accessed via the national system of gas pipelines to be owned and operated by CENAGAS.

The JV will be managed and operated by TrailStone and, subject to regulatory approvals, expects to be operational by the first quarter of 2016. The companies involved in the JV are actively pursuing and engaged in conversations with U.S. producers and end-users in Monterrey and customers connected to the Mexican national grid. The JV will provide these customers with a bundled natural gas supply package that can include Henry Hub or Houston Ship Channel-based pricing alternatives as well as swing and storage services.

“The marketing company will provide a convenient and efficient option for end-users in the Monterrey area and other regions of Mexico to benefit from low cost U.S. natural gas under the new open access regulations that will become effective in Mexico in 2016,” said Larry Bell, Kinder Morgan Natural Gas Midstream vice president of marketing and transportation. “Pending signed agreements, the JV will market capacity allocated to a TrailStone subsidiary on KMI’s Mier-Monterrey expansion. Our Texas Intrastate system will provide transportation, storage and gas supply services in the United States in support of the JV, and benefit from increased utilization of its existing assets.”

“This JV is a significant building block in the expansion of TrailStone’s physical commodity trading and logistics platform,” said TrailStone Chief Executive Officer David Silbert. “We are excited to further develop our strategic relationship with Kinder Morgan, which is one of the most prominent and proven energy companies in North America.”

Pending execution of the formal JV agreement and commitments to sell gas through the Mexican marketing company, Kinder Morgan will commence its Mier-Monterrey expansion, which will consist of adding compression and/or looping KMI’s existing Mier-Monterrey pipeline system from the Mexico-United States border to Huinalá, Nuevo León, Mexico. The expansion can be completed by the fourth quarter of 2017 and will provide up to 200,000 Mcf/d of incremental capacity into the Monterrey area. Kinder Morgan can further expand the capacity of the system by up to an additional 500,000 Mcf/d, if sufficient demand exists.

Customers subscribing to capacity on the additional expansion will have access to Texas pipeline hubs and out-of-region supply via firm transport on Kinder Morgan’s existing Texas intrastate system. Kinder Morgan will also expand its intrastate system to accommodate the desired capacity.

“We received interest in our binding open season from numerous industrial and power generation consumers and plan to move forward with the project as commitments are obtained,” said Kinder Morgan Natural Gas Midstream President Duane Kokinda. “Potential customers will have options to subscribe for transport capacity on the expansion and source U.S. gas supply on their own, or contract with the JV to have natural gas delivered to their facility in Mexico. The proposed project utilizes existing rights-of-way and will expand upon our existing assets to provide a low-risk and low-cost option for additional capacity to transport natural gas produced in the United States to the growing industrial and power-generating markets in and around Monterrey, Nuevo Leon, and into Mexico’s national grid.”

Kinder Morgan Inc. subsidiary Kinder Morgan Gas Natural de México S. de R.L. de C.V. owns and operates the 85-mile Mier-Monterrey pipeline, which has been in service since 2003 and stretches from the International Border between the United States and Mexico in Starr County, Texas, to Monterrey, Mexico. The pipeline connects to a 1,000-MW power plant complex and to the national grid.

Kinder Morgan Inc. is the largest energy infrastructure company in North America. It owns an interest in or operates 84,000 miles of pipelines and approximately 165 terminals. The company’s pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals, and handle bulk materials like coal and petroleum coke. Kinder Morgan is the largest midstream and third largest energy company in North America with an enterprise value of approximately $110 billion.

TrailStone Group is a global asset-backed commodities logistics and trading company that is funded by Riverstone Holdings LLC. Since being formed in April 2013 by David Silbert, TrailStone has developed a logistics-based commodities platform that is focused on oil and refined products, natural gas and power, metals and mining and agriculture. TrailStone has offices in London, Berlin, Sydney, Amsterdam, Austin and New York.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.