A subsidiary of Kinder Morgan Inc. (NYSE: KMI) 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 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 US 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 US 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 US in support of the JV, and benefit from increased utilization of its existing assets.”
TrailStone CEO David Silbert added, “This JV is a significant building block in the expansion of TrailStone’s physical commodity trading and logistics platform.”
Pending execution of the formal JV agreement and commitments to sell gas through the Mexican marketing company, Kinder Morgan will begin its Mier-Monterrey expansion, which will consist of adding compression and/or looping KMI’s existing Mier-Monterrey pipeline system from the Mexico-US 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.
Kinder Morgan Gas Natural de México S. de RL de CV owns and operates the 85-mile Mier-Monterrey pipeline, which has been in service since 2003 and stretches from the border between the US and Mexico in Starr County, Texas, to Monterrey, Mexico. The pipeline connects to a 1,000-megawatt power plant complex and to the national grid.