US pipeline companies eye natural gas infrastructure for growth

The headquarters of U.S. energy exporter and pipeline operator Kinder Morgan Inc. is seen in Houston, Texas, U.S. September 27, 2020. REUTERS/Gary McWilliams/File Photo

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NEW YORK, July 20 (Reuters) – U.S. midstream companies have set their sights on gas pipelines and export terminals as a key growth opportunity as investor pressures and political headwinds make new pipeline projects unpleasant crude oil.

U.S. pipeline operators are expected to have benefited from high oil and gas prices and rising domestic production in the second quarter, although some analysts warn that lower consumer demand at the end of the quarter could affect results .

According to a Reuters analysis, earnings per share for five of the major U.S. pipeline companies are expected to have risen about 15% from a year earlier.

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Natural gas projects are expected to be the mainstay of growth in coming years as production increases and shippers find new customers in Europe, which is trying to wean itself off Russian power, and in Asia, where many countries are increasing their LNG imports.

“The biggest opportunity right now is primarily to serve LNG, whether it’s adding export capacity to the United States or building pipelines to get gas to LNG terminals.” said Stephen Ellis, strategist at financial services firm Morningstar.

Kinder Morgan Inc (KMI.N), which kicks off the interim earnings season on Wednesday, recently received the go-ahead to fund the capacity expansion of its Permian Highway pipeline, which ships gas from West Texas to Houston for export. Read more

The Houston-based pipeline operator is expected to report earnings per share of 27 cents for the quarter ended June 30, compared to adjusted earnings of 23 cents per share in the same period a year ago.

The expansion follows several proposals to build liquefied natural gas (LNG) processing plants along the U.S. Gulf Coast, which have a potential to liquefy about 3.1 billion cubic feet per day (bcfd) of new gas supplies, to take advantage of increased European and Asian demand. Read more

Total natural gas production from the largest shale basins in the United States is expected to increase by 0.7 trillion cubic feet per day to a record 93.0 billion cubic feet per day in August, according to the Energy Information Administration forecast. Other companies looking to add new pipelines, particularly in the Permian, include units of Energy Transfer LP (ET.N) and MPLX LP (MPLX.N).

A major challenge for midstream operators in the coming years will be whether they are able to build new pipelines in areas outside of the US Gulf.

“Everyone has pretty much given up on building another long-haul pipeline anywhere outside of Texas and, maybe, Louisiana,” said Bradley Olsen, senior portfolio manager for midstream infrastructure strategy. of Recurrent Investment Advisors.

The industry is watching the ongoing legal and environmental battle over the completion of Equitrans Midstream Corp’s (ETRN.N) Mountain Valley natural gas pipeline from northwest West Virginia to southern Virginia. This line is due to be completed next year, but has been embroiled in legal battles that have prevented it from being completed. Read more

Unlike natural gas, crude oil pipeline capacity exceeds production. Currently, there is about 8 million barrels per day of Permian crude pipeline capacity and less than 5.5 million bpd of production, according to figures from the EIA and Morningstar.

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Reporting by Laila Kearney in New York. Additional reporting by Arathy Somasekhar in Houston; edited by David Evans

Our standards: The Thomson Reuters Trust Principles.

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