Kinder Morgan to Upgrade Terminal

Kinder Morgan Energy Partners L.P. (KMP - Analyst Report) has set aside $210 million to upgrade its Edmonton Terminal in Strathcona County, Alberta. The enhancement plan includes construction of seven tanks with a storage capacity of 2.4 million barrels for crude oil and condensate at the Edmonton facility.

Kinder Morgan Canada Terminals has signed long-term agreements with customers to execute the project. Earlier, Trans Mountain Pipeline, a subsidiary of Kinder Morgan had received consent from the National Energy Board to construct merchant and regulated tanks at the Edmonton facility.

The construction of the tanks is expected to begin in early 2012 after the partnership receives the supporting permits. The project is likely to have a gestation period of about 2 years with commissioning expected in late 2013.

The additional tankage at the terminal is essential to accommodate rising oilsands production and merchant storage capacity along with volatility in crude oil prices. These seven tanks represent the first stage in a plan to add as much as 6 million barrels of new storage space at the terminal.

TransMountain, with a current handling capacity of 300,000 barrels per day (bpd) could add up to 200,000 bpd or more of new capacity through a planned expansion by 2017. It passes from Edmonton to Vancouver, British Columbia, and Washington’s Puget Sound refineries, and offers the only access to Pacific markets for Canadian oil producers.

The project was first proposed in 2007 and suspended on account of recession. Though it is not related to the partnership’s plans to expand its TransMountain pipeline, it will provide a direct link to the pipeline. The expansion would also enhance tanker space at the Port of Vancouver.

Kinder Morgan holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we a Neutral rating on the stock. It faces threats from Enterprise Products Partners LP (EPD - Analyst Report) and Enbridge Energy Partners LP (EEP - Analyst Report).

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