Pipeline projects are not dependent on oil prices. They are dependent on the difference in oil prices between locations and the volumes used.
The West Texas prices are further depressed due to the increased production rates from the Permian basin and associated pipeline bottlenecks moving the surplus to markets. Also with lower prices, gasoline consumption is rising.
Thanks for your response, thackney. I had just read this article in a local paper (White Mountains, Eastern Arizona), so perhaps I was thinking locally and anecdotally. But, for the residents near to this pipe project, this busted their balloons for sure. The tenor of the article, right or wrong, is that the plug was pulled due to falling oil prices, FWIW.
Kinder Morgan pulls plug on CO2 pipeline
Bob Martinson The Independent | Posted: Thursday, January 29, 2015 5:00 am
ST. JOHNS — The hopes and prayers of most people in Round Valley and St. Johns has been to see
Kinder Morgan’s Lobos CO2 pipeline become a reality in the area.
The Independent has confirmed with Bureau of Land Management’s Lobos Pipeline Project Manager
Mark Mackiewicz that the planned development is dead for now. Kinder Morgan, the nation’s fourth
largest corporation and largest energy infrastructure company in North America, said in a press
release that the project is not cancelled but “delayed for the time being given current market
conditions.”
“The project timing is being reassessed due to current market conditions related to the significant
decline in oil prices. KMI will continue to reevaluate the timing of its planned investment of
approximately $1 billion to develop the St. Johns source field and construction of the Lobos Pipeline,
as well as the related expansion of the southern portion of the Cortez Pipeline to accommodate future
required CO2 capacity from St. Johns field,” Kinder Morgan said.
After the loss of the pot ash industry after almost becoming a reality, residents of the area have been
counting on a nearly $1 billion investment from the company to build the pipeline which was to have
originated from between St. Johns and Springerville and would have traveled across New Mexico,
connecting with an existing line into Texas.
That dream is now being “tabled,” according to an email from Kinder Morgan to the BLM manager
who had only about six weeks remaining before an environmental impact statement was to be
completed on the project.
On Jan. 23, Kinder Morgan announced that, as the next step, it has withdrawn its application for U.S.
Bureau of Land Management rightofway review for the proposed Lobos Pipeline.
“Withdrawal of the pipeline rightofway application for the time being will allow us time to
complete the reassessment of the overall project, and we have the option of moving forward with the
application process once we complete our reassessment,” said Jesse Arenivas, CO2 president.
“We have not cancelled the Lobos Pipeline Project, but rather delayed it for the time being given
current market conditions, and Kinder Morgan will continue limited activity in the St Johns source
field. We remain committed to expanding the supply of CO2 for enhanced oil recovery projects and
believe that over the longterm, the markets will support such projects.”
“It’s just devastating news for this area,” said Doyel Shamley, a local resident who was working with
BLM on the environmental assessments. “All those employees that would have been renting or living
in hotels here, the food they would have purchased and who knows how much money would have1/29/2015 Kinder Morgan pulls plug on CO2 pipeline White Mountain Independent: Premium News
http://www.wmicentral.com/news_premium/kindermorganpullsplugoncopipeline/article_bc8d0542a5ba11e4a549371784cd0ee0.html?mode=print 2/2
been spent on supplies to keep their equipment running. It would have all been purchased here.”
Shamley was upset with the fact that the EIS was almost complete.
“They just sent out an email saying it was being tabled,” Mackiewicz said. “I told the company that
they had better put out a press release right away, because we’re going to, letting people know that
their jobs are done. I was really counting on seeing this thing go through.”
Mackiewicz said he was sympathetic to the St. Johns and Round Valley area and knew what it meant
to the local economy. He speculated that the company’s latest acquisition of another company,
Hiland Partners, might not have had a lot to do with it but said the drop in oil prices may have had
something to do with the company’s “evaluating this project and restructuring their plans from
strictly an economic standpoint.”
Kinder Morgan confirmed that statement later Friday evening. Kinder Morgan has been restructuring
since last August and has completed many recent transactions as a result. The purchase of the other
pipeline was announced in the most recent issue of Fortune Magazine.
Reach the reporter at bmartinson@wmicentral.com