Slide 1: Natural Gas Pipelines
Natural Gas Pipelines Deb Macdonald/Steve Kean
Slide 2: NGPL Impact on KMI Earnings
NGPL Impact on KMI Earnings 2003 Actual 2004 Budget NGPL KMP NGPL 41% 45% 43% KMP 48% Retail Retail 7% 7% Trans- Power Trans- Colorado Power 2% Colorado 3% 1% 3% (a) 2003 results and 2004 budgeted segment earnings before allocation allocation of G&A and interest expense. KMP includes: (i) general pa
Slide 3: KMP Natural Gas Pipelines
KMP Natural Gas Pipelines (a) Products Pipelines Natural KMIGT 33% Gas Texas 25% Pipelines Intrastates 26% 53% Terminals Trailblazer 17% 12% CO2 Pipelines Red Cedar/ 24% Other Rockies 10% (a) 2004 budgeted distributable cash flow before allocation of G&A G&A and interest 3
Slide 4: KMP Natural Gas Pipelines' Trend
KMP Natural Gas Pipelines’ Trend ’02 Actuals ’03 Actuals ’04 Budget Income before $325 MM $373 MM $383 MM DD&A DCF $311 MM $346 MM $349 MM Growth from ’02 to ’03 Full year of Tejas Full year of revenue from Trailblazer expansion Partial year revenues from North Texas and Monterrey pipelines ’04 Budg
Slide 5: KMP Texas Intrastates
KMP Texas Intrastates ’02 Actuals ’03 Actuals ’04 Budget Income before $144 MM $190 MM $203 MM DD&A DCF $138 MM $175 MM 185 MM Growth from ’02 to ’03 Full year of Tejas BP contract volume increase Monterrey and North Texas pipelines in service for partial year KMTP/Tejas Comparison to Acquisition Mo
Slide 6: Sustaining Capital: Approach to Pipeline Integrity
Sustaining Capital: Approach to Pipeline Integrity Ongoing process of risk ranking of the entire pipeline network PIRAMID software program Engineering, technical support and field operations management input Multi-year approach constantly adjusted, incorporating updated information. 6
Slide 7: Sustaining Capital: A Long-Term Viewpoint
Sustaining Capital: A Long-Term Viewpoint DOT Requirements: Pipeline Safety Act of 2002 Years 1-5: 50% of highest risk, Highest Consequences Area (HCA) Years 6 - 10: Other 50% of HCA Reassessment – every 7 years thereafter Texas Regulatory Requirements: Years 1- 5: 50% of all pipeline network, highe
Slide 8: Infrastructure Development
Infrastructure Development
Slide 9: Infrastructure
Infrastructure In – Service 2003 NGPL North Lansing Storage Expansion Monterrey Pipeline in Mexico In – Service 2004 KMIGT CMC Storage Expansion TransColorado Expansion Texas Intrastates’ Rancho Pipeline 9
Slide 10: Infrastructure
Infrastructure Proposed: In – Service 2005 Texas Intrastates’ Dallas Pipeline Texas Intrastates’ Markham Storage Expansion Proposed: In – Service 2006 West Texas Pipeline Advantage Southern Pipeline Piceance – Cheyenne Pipeline Silver Canyon Pipeline 10
Slide 11: NGPL North Lansing Storage Expansion
NGPL North Lansing Storage Expansion 6,000 HP compression 17 new wells 10.7 Bcf additional capacity $35.6 MM capex 802 Fully contracted Service commenced Spring, 2003 Dallas North Lansing NGPL Storage 388 Marshall Longview 304 11
Slide 12: Monterrey Pipeline
Monterrey Pipeline Mexico Texas Corpus Christi Laredo U.S. scope-9 miles of 30” pipe Mexico scope-137.5 km of 30” pipe 375,000 Dth/day capacity $87 MM capex Monterrey Fully contracted for 15 years Pipeline Mid-March, 2003 in-service McAllen Iberdrola Power Plant Proposed Monterrey Pipeline KM Texas
Slide 13: Cheyenne Market Center
11,300 HP compression 10 new wells Cheyenne Market Center 6.0 Bcf additional capacity $28.4 MM capex Fully contracted for 10 years Projected Summer, 2004 in-service Nebraska Wyoming Huntsman Storage CIG Cheyenne Cheyenne Hub Proposed Advantage Pipeline KMIGT Pipeline Trailblazer El Paso-CIG Colorado
Slide 14: TransColorado Expansion
TransColorado Expansion Greasewood !( $33 MM Capex 20,000 H.P. Whitewater 125 MDth/d Capacity ") Fully contracted for 10 years Projected August, 2004 In-Service ") Olathe Redvale ") Dolores ") Proposed Compressor Station ") Mancos Existing Compressor Station TransColorado Pipeline Utah Colorado Mark
Slide 15: Rancho Pipeline
Rancho Pipeline Acquisition Only Waha No Conversion Hub Austin Nebo Station Katy Houston Acquisition and Convert to Gas Not Acquiring $30 MM Capital (including acquisition, conversion and construction costs) 130 miles conversion to natural gas 5.1 mile lateral Multiple interconnects 15
Slide 16: Kinder Morgan DFW Project Map
Kinder Morgan DFW Project Map Station Barnett 802 Shale Station 155 North Dallas Ft. Lansing Worth Storage 388 Longview 304 Proposed Pipeline NGPL KM North Texas Pipeline 16
Slide 17: Markham Storage
Markham Storage ") ") KM Storage Field Katy ") KM Tejas Pipeline ")& - # * Houston KM Texas Pipeline NGPL Compressor Station jk West ") Clear Lake Gas Plant Market Hub ") 30 ” # * ”& ” 30 26 ") TP PL M G K N 30 ” Stratton ” 36 Ridge kjkj ”& 30 kj e jas T Markham $30 MM Capex KM Storage 5 Bcf Working
Slide 18: Proposed West Texas Pipeline
Proposed West Texas Pipeline Proposed Texas Hinshaw pipeline 30-inch pipe 9,100 HP compression 144 167 400,000 – 500,000 Dth/day capacity NGPL $160 to $200 MM capex TW NNG Projected January 2006 in-service NEW MEXICO EPNG 139 EPNG TEXAS Hueco C.S. El Paso NNG Proposed Pipeline Proposed Comp. Sta. PE
Slide 19: Piceance to Cheyenne and Advantage Pipelines
Piceance to Cheyenne and Advantage Pipelines Wamsutter Nebraska Wyoming Cheyenne Greasewood Colorado Kansas Proposed Piceance-Cheyenne Pipeline Approximately $350 MM to $1.2 B Capex Proposed Advantage Pipeline 540,000 to 2,000,000 MDth/d Capacity TransColorado Pipeline Projected In-Service: 2006 KMI
Slide 20: Silver Canyon Pipeline
Silver Canyon Pipeline Las Vegas !( Blanco Arizona California Needles Albuquerque !( !( Topock Blythe/ Proposed Ehrenberg Copper Eagle Storage !( Phoenix Blythe Energy Harqualhala New Mexico San Diego Palo Verde West Phoenix Arlington Valley Mesquite APS Redhawk Panda Gila River Approximately $950 M
Slide 21: Interstate Pipelines Update
Interstate Pipelines Update
Slide 22: NGPL
NGPL Contract expirations less significant in 2004 vs. 2003 Significant recontracting success already for 2004 Success in buy-outs with merchant energy companies exiting the business or in bankruptcy De minimus remaining bankruptcy exposure/100% reserved New players on the system have replaced the l
Slide 23: NGPL FTS Capacity Summary
NGPL FTS Capacity Summary (Volumes in TBtu/d) Long-Haul Louisiana/Crosshaul Total 3.3 TBtu/d .378/.975 TBtu/d 4.653 TBtu/d Contract MDQ Expiring 2.01 0.63 2.64 in 2003 Sold as of January 2003 1.29 0.46 1.76 Q1 - 1.00% Q1 - 2.70% Remaining 2003 Q2 - 0.75% Q2 - 4.40% Availability at Beginning of Quart
Slide 24: 2004 FTS Availability/Expirations Remaining by Quarter
2004 FTS Availability/Expirations* Remaining by Quarter (Volume in Dth/day) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Cumulative 2004 Amarillo Mainline 10,000 30,000 30,000 230,000 230,000 Gulf Coast Mainline 50,000 167,000 219,000 147,000 147,000 Louisiana Line 30,000 70,000 69,000 65,000 65,
Slide 25: NGPL DSS Capacity
NGPL DSS Capacity 2003 2004 2003 Contract Expirations: 21.73 TBtu 2004 Availability: 18.01 TBtu Sold as of January 2003: 21.68 TBtu Sold As of January 2004: 100%* Sold as of Spring 2003: 100%` * Represents availability less conversion of 1.5 TBtu of DSS to 4.5 TBtu of NSS in 2004 25
Slide 26: NGPL NSS Capacity
NGPL NSS Capacity 2003 2004 2003 Contract Expirations: 88.6 TBtu *2004 Availability: 38.6 TBtu Sold as of January 2003: 64.2 TBtu Sold As of January 2004: 100% Sold as of Spring 2003: 100%` * Represents contract expirations and conversion of 1.5 TBtu of DSS to 4.5 TBtu of NSS 26
Slide 27: Significant Rollovers
Significant Rollovers Peoples Gas/North Shore Gas Rolled 12.65 Bcf of DSS for 3 year term Rolled 123,000 Dth/d long-haul FTS for 2 year term Contracted for 59,000 Dth/d summer only FTS for summer ’03 - ’04 and then rolled for three additional summers Rolled 60,000 Dth/d winter-only market area FTS f
Slide 28: Significant Rollovers
Significant Rollovers Wisconsin Electric Rolled 111,000 Dth/d annual long-haul FTS Rolled 19,133 Dth/d winter-only FTS Rolled for 5 years with MDQ; Rachets years 3 to 5 Rolled 1.2 Bcf of DSS for 3 year term Procter & Gamble Rolled 14,400 Dth/d short-haul FTS Contracted for 2,500 Dth/d incremental FT
Slide 29: Significant Rollovers
Significant Rollovers Laclede Gas Rolled 20,000 Dth/d long-haul FTS 1 year term NICOR Gas Rolled 100,000 Dth/d ’03 – ’04 winter-only FTS for additional winter of ’04 – ’05 Rolled 100,000 Dth/d long-haul FTS from April ’04 to March ’07 Rolled 40,000 Dth/d long-haul FTS from April ’05 to March ’07 Mar
Slide 30: Significant Rollovers
Significant Rollovers International Steel Group 10,000 Dth/d of long-haul FTS 18 month term Aquila Networks Rolled 1,402 Dth/d annual FTS-G Rolled 24,000 Dth/d annual FTS Rolled 50,000 Dth/d winter-only FTS Rolled.05 Bcf of DSS Rolled 3.56 Bcf of NSS All for 5 year term Contracted for incremental 22
Slide 31: Significant New Contracts
Significant New Contracts BP Canada Energy Marketing Contracted 250,000 Dth/d long-haul FTS for 3 years commencing May ’03 Contracted 7 Bcf NSS storage for ’03 to ’04; extended for second- year term to ’05 Rolled 3 Bcf additional NSS starting April ’04 for 1 year Virginia Power 13,000 Dth/d long-hau
Slide 32: Significant New Contracts
Significant New Contracts Tenaska 50,000 Dth/d long-haul FTS for 13 month term beginning 10/01/03 20,000 Dth/d (peak)/10,000 Dth/d (off-peak) for one year term beginning 11/01/03 University of Illinois Contracted 10,000 Dth/d incremental long-haul FTS for 29 months beginning October ’03 Other New Sh
Slide 33: KMIGT
KMIGT Stable earnings base Existing assets subject to limited competition No rate case filing requirement cost and revenue study in 2004 Lower re-contracting risk 33
Slide 34: KMIGT Contract Expirations
KMIGT Contract Expirations Percent of 2004 Dth/d Total Cap Long-haul 94,935 11% Short-haul 12,851 2% Displacement 18,609 2% Total 126,395 15% 2005 Long-haul 16,625 2% Short-haul 10,234 1% Displacement 0 0% Total 26,859 3% 34
Slide 35: Trailblazer
Trailblazer Stable earnings base Access to Rocky Mountain supply Low cost provider Supply source for NGPL Looping necessary for any further expansion De minimus contract expirations until 2007: 2004: 0% 2005: 8% 35
Slide 36: Trailblazer Rate Case Status
Trailblazer Rate Case Status Contested settlement pending before FERC BP and Marathon severed as contesting parties Hearing held for contesting parties October 2003 ALJ decision expected March, 2004 Settlement Provisions Decrease in rate for existing system from 12¢ to 9¢ per Dth effective January 1
Slide 37: TransColorado
TransColorado 100% Kinder Morgan ownership 2003 revenue in 1st and 2nd Quarters benefited from index-based contracts and basis spreads between Rockies and San Juan pre- Kern River expansion 2003 long haul capacity fully contracted De minimus resubscription risk prior to 2008 2004 expansion fully con
Slide 38: Production Trends
Production Big Trends Horn 60 (-3) Powder River Basin 1041 (+14) Wind River 641 (+113) 2003 2nd Quarter Average (Change from 2002) MMcf/d Green Hanna River 2,698 (+280) Cheyenne Salt Lake Sand City Wash 29 (-22) Uinta 584 (+12) Greasewood Piceance Denver 460 (+33) Paradox 172 (+29) TransColorado Pip
Slide 39: Regulatory Update
Regulatory Update Negotiated Rate Policy Statement Banned indexed negotiated rates Preserved fixed rates for new construction Rehearing pending Energy Affiliate Rule Major change in definition of energy affiliates so that Hinshaw and intrastate pipelines, producers, gatherers and processors are now
Slide 40: Texas Intrastate Pipelines Update
Texas Intrastate Pipelines Update Steve Kean
Slide 41: Texas Natural Gas System
Texas Natural Gas System West Texas Pipeline Dallas Dallas El Paso Pipeline TxOk Waha Rancho Pipeline Austin Katy Ship Channel NGPL KMTP KM Tejas North Texas Pipeline Agua Dulce KM Mier - Monterrey Pipeline South Texas Proposed Pipeline Market Hub KM Processing/Treating Facilities Monterrey 41
Slide 42: Business Description
Business Description Capacity: approximately 5 bcf/day Throughput: 4 – 4.5 bcf/day Storage Capacity: 120 bcf (including WCL) Processing/Treating Capacity: 250 MMcf/day Market: HSC Industrial, LDC, Utility, and Merchant Power 42
Slide 43: Business Description
Business Description Market Flat market in Houston Ship Channel; highly competitive Growth opportunities: Austin, Dallas, Mexico Hub-to-hub spreads tightening (at least seasonally) Significant pipeline participation in sales business (low % gross margin) Texas Railroad Commission regulation State-sp
Slide 44: Objectives and Strategy
Objectives and Strategy Objectives Strategy • Modest volume growth on existing system, so growth Enhance base business dependent on margin enhancement • Segment market/services -swing service -pressure -quality • Reach supplies and markets away from hubs to capture additional margin Grow earnings th
Slide 45: Progress to Date
Progress to Date Fee for service transition BP and PEMEX contracts New expansions predominately transport/storage rather than merchant- - Monterrey and North Texas Storage sold out as service Reduce credit exposure by converting some high risk sales customers to transport Significant reduction in ex
Slide 46: Tejas Integration
Tejas Integration Tejas integration Interconnection capability expanded from .3 bcf/day to 1.7 bcf/day Legal consolidation of Tejas entities Improved systems processes and controls Remote metering capabilities for 90% of volume Management of volumetric exposure to inadvertent positions Marginal cost
Slide 47: Intrastate Physical Throughput Vs Fuel
Intrastate Physical Throughput Vs Fuel 5,000 24 4,500 21 18 4,000 15 3,500 12 3,000 9 6 2,500 3 2,000 0 02 02 02 03 03 03 03 2 2 3 3 /0 /0 /0 /0 4/ 6/ 8/ 2/ 4/ 6/ 8/ 10 12 10 12 Thruput Fuel Linear (Fuel) 47
Slide 48: Infrastructure Opportunities
Infrastructure Opportunities Austin Dallas Mexico Storage Expansion LNG 48
Slide 49: Rancho Pipeline
Rancho Pipeline Acquisition Only Waha No Conversion Hub Austin Nebo Station Katy Houston Acquisition and Convert to Gas Not Acquiring $30 MM Capital (including acquisition, conversion and construction costs) 130 miles conversion to natural gas 5.1 mile lateral Multiple interconnects 49
Slide 50: Rancho Pipeline Opportunity
Rancho Pipeline Opportunity Project Description: Acquire 172 mile segment of the 24” Rancho Crude Oil Pipeline from Katy to just west of Austin and convert to natural gas service. Strategy: Expand capacity into the growing Austin market area at lower than new construction cost, while adding to servi
Slide 51: Kinder Morgan DFW Project Map
Kinder Morgan DFW Project Map Station Barnett 802 Shale Station 155 North Dallas Ft. Lansing Worth Storage 388 Longview 304 Proposed Pipeline NGPL KM North Texas Pipeline 51
Slide 52: Dallas Area Expansion Project
Dallas Area Expansion Project Opportunity: Develop new pipeline project to support significant production growth out of the Barnett Shale area and market growth in the Dallas area. Project Description: Pipe Size 20” 20” - 30” 30” with capacity of 170MMBtu/d – 400 MMBtu/d. MMBtu/d. Depending on marke
Slide 53: Proposed West Texas Pipeline
Proposed West Texas Pipeline Proposed Texas Hinshaw pipeline 30-inch pipe 9,100 HP compression 144 167 400,000 – 500,000 Dth/day capacity NGPL $160 to $200 MM capex TW NNG Projected January 2006 in-service NEW MEXICO EPNG 139 EPNG TEXAS Hueco C.S. El Paso NNG Proposed Pipeline Proposed Comp. Sta. PE
Slide 54: Kinder Morgan West Texas
Kinder Morgan West Texas Timeframe PEMEX decision March – April ‘04 Projected In-service January ‘06 Description 300,000 to 500,000 MMBtu contract Interconnection with NGPL and Transwestern in Permian CAPEX $160-200MM 54
Slide 55: Markham Storage
Markham Storage ") ") KM Storage Field Katy ") KM Tejas Pipeline ")& - # * Houston KM Texas Pipeline NGPL Compressor Station jk West ") Clear Lake Gas Plant Market Hub ") 30 ” # * ”& ” 30 26 ") TP PL M G K N 30 ” Stratton ” 36 Ridge kjkj ”& 30 kj e jas T Markham $30 MM Capex KM Storage 5 Bcf Working
Slide 56: Markham Gas Storage Facility Expansion
Markham Gas Storage Facility Expansion Project Description: Create an incremental 5 bcf of working capacity that could be sold as multi-cycle storage. Rationale: Low cost storage expansion utilizing existing infrastructure (with added compression) Customers: PEMEX, independent power producers, indus
Slide 57: Existing & Proposed Gulf Coast LNG Plant Locations
Existing & Proposed Gulf Coast LNG Plant Locations ") SU Trunkline (existing) ! ") ") ") Katy ") ") Henry & - ") & -") *# ! ! ") ") kj Shell LNG ") ExxonMobil *# Sabine ! ! ") ChevronTexaco jk Chenier Port Pelican kj ! Sabine Pass ") ") Freeport LNG ") ") ") Exxon Corpus Christi LNG ")") !! ") ") ")
Slide 58: LNG
LNG KM’s likely role is as provider of takeaway capacity and downstream services (e.g. storage) Objective: attract LNG to KM systems Proposals sent to several developers on Gulf Coast Current focus – Freeport LNG 58
Slide 59: Key Challenges
Key Challenges Significant sustaining capex and maintenance costs for regulatory compliance continue in ‘04 and ‘05 Market declines possible, particularly in commodity chemicals sector Credit quality Decline in hub-to-hub spreads Continuing effort to reduce exposure to sales business 59
Slide 60: Anticipated Expenditures ($1,000's)
KMTP/Tejas Proposed Baseline Assessment Yr Versus Number of Miles/ Projects and Anticipated Capital Expenditures 800 13000 Smart Pig Miles $11.26M $11.33M 12000 Hydrostatic Test Miles 700 M Total Miles 11000 $10.03M Anticipated Expenditures ($1,000's) Number of Projects 10000 600 Anticipated Expendi
Slide 61: Conclusion
Conclusion Modest base business growth Good performance from capital projects Significant growth opportunities from new projects Actively managing our key challenges 61
Slide 62: Kinder Morgan
KINDER’ MORGAN