Morningstar | Kinder Morgan Exits Oiltanking Crude Oil Export Project, Paving the Way for More Attractive Options
Kinder Morgan has exited the Texas COLT crude oil export terminal, indicating that it does not align with its strategic priorities as well as citing a lengthy permitting process. This shift confirms our expectations that the project is one of the less attractive export efforts under consideration in the midstream industry at the moment. Enbridge has agreed to purchase Kinder Morgan's stake in the project, leaving Enbridge and Oiltanking Partners (a German storage firm) as the remaining partners. The moves do not affect our fair value estimates or moat ratings for the firms involved. Given numerous competing terminals (including more attractive efforts from Enterprise Product Partners and Tallgrass) for exports barrels, we believe the project has a low chance of going forward.Kinder Morgan's decision to pull out lowers the odds even further, in our view. The size of the terminal (2 million bpd) and expected in-service date (2022) mean it would come online much later than peers' projected dates, and after considerable production capacity available for export had been committed elsewhere. Given our projections for oil production from the Permian Basin, which is the most attractive source of crude for export, we think finding incremental barrels for a project of this size is challenging. The competing efforts, such as Enterprise Products Partners' and Tallgrass' efforts already have a level of customer commitments to their projects, despite being relatively early-stage, raising our level of confidence that they will move forward and be successful. Enterprise Products Partners, for example, has an extensive Houston distribution infrastructure that it can leverage to optimize supply for its own export terminal.
For more on our crude oil exports forecast and our individual assessment of each of the major midstream crude oil export projects in progress, please see our report, "The U.S. Crude Export Boom and the Midstream Opportunity," published in February 2019. In this piece, we specifically identified the Texas COLT terminal as having a low chance of going forward.
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