Kinder Morgan Energy Partners, L.P. (NYSE: KMP) today announced it has entered into a long-term, fee-based agreement with BP North America to underwrite an additional 50,000 barrels per day (bpd) of throughput capacity at the petroleum condensate processing facility Kinder Morgan is constructing near its Galena Park terminal on the Houston Ship Channel. With the new agreement, Kinder Morgan will invest an additional $170 million to add a second unit to its previously announced $200 million condensate processing facility and increase the facility’s total capacity to 100,000 bpd. The investment also includes the company building an additional 700,000 barrels of storage capacity for product being split at the facility.
“We are pleased to secure long-term contracts for all of the throughput capacity at our facility, and provide BP with the processing needed for Eagle Ford Shale production and other condensates,” said KMP Products Pipelines President Ron McClain. “Combined with our recently completed Kinder Morgan Crude Condensate (KMCC) pipeline, we are able to provide unparalleled connectivity to crude oil and clean products markets on the Texas Gulf Coast.” The transaction is expected to be immediately accretive to cash distributable to KMP unitholders upon the project’s completion in the second quarter of 2015.
Kinder Morgan’s processing facility will split condensate into its various components, such as light and heavy naphtha, kerosene, diesel and gas oil, and can be further expanded pending additional market interest. Kinder Morgan previously announced the first phase of its processing facility when it secured the initial commitment of 25,000 bpd of capacity. The company expects to place the first unit in service in the first quarter of 2014.
Paul Reed, Chief Executive of BP’s integrated supply and trading business, said, “BP is proud to build upon our strategic partnership with Kinder Morgan through an increased footprint in Galena Park. We believe that by accessing this additional throughput capacity we will be better placed to provide U.S. producers a full suite of services including access to the best homes for their crude and condensates. It will also enable BP to service our customers better and more efficiently manage their feedstock and product needs. BP remains committed to helping unlock additional U.S. domestic energy production.”