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Kinder Morgan will buy the natural gas pipeline portfolio of NextEra Energy Partners in Texas, paying $1.82 billion for the assets.
The pipeline network has a throughput capacity of 4.9 billion cu ft daily, Kinder Morgan said in a news release about the deal.
The company added that the pipeline assets were “highly contracted”, with the average length of contract at eight years and that 75% of the capacity was subject to take-or-pay contracts. The pipelines are used to send gas to Mexico as well as to oil producers in Southern Texas.
Gas pipelines have become a weak link in U.S. energy due to massive opposition to [pretty much any new project in the area. Because of this opposition, growth in U.S. gas production has been constrained even though it has continued to grow over the past few years.
Earlier this month, the chief executive of the largest gas producer in the country, EQT, said that the Appalachian Basin had reached the limit of what it can produce due to a shortage of offtake pipelines.
Commenting on the effects of pipeline opposition to the FT, Toby Rice said “The industrial world that we enjoy now is severely compromised because of the lawsuits, the pushback and the movement to cancel energy infrastructures and modern society. We’ve run out of flexibility.”
Due to the obstacles to new infrastructure construction, existing pipelines have become highly valuable, which has sparked a wave of asset acquisition as operators seek to boost their competitive advantage amid growing production and, above all, demand.
In September, Reuters reported that since the start of this year, there had been six major acquisition deals in the oil and gas pipeline space, with all but one of them with a price tag of over $1 billion. The largest deal so far this year was Magellan Midstream Partners’ sale to ONEOK for $18.8 billion.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com