kinder morganof (KMI -0.16%) The growth engine has run out of fuel in recent years. The company’s revenues have only increased by 9% since 2016, but operating cash flow has increased by 11% over the period. This is largely due to significantly lower expansion-related spending as there are less attractive opportunities to expand the core fossil fuel infrastructure footprint.
The company has begun a transition to low-carbon fuels, including producing renewable natural gas and working with renewable diesel, but those are minor growth drivers. One potential growth opportunity is the emerging carbon capture, utilization and sequestration (CCUS) sector. The company already has expertise in carbon dioxide transport and utilization, making it an ideal extension of its existing capacity.
carbon dioxide leader
Kinder Morgan operates major energy infrastructure businesses in North America.it has the largest natural gas pipeline transmission network. It is also the largest independent carrier of refined products and the largest independent terminal operator. These businesses provide approximately 91% of the company’s revenue.
Kinder Morgan’s remaining revenue is from the carbon dioxide segment. The company owns his 1,500-mile carbon dioxide pipeline that can transport 1.5 billion cubic feet per day. It has the largest capacity in Japan. The company transports carbon dioxide produced from naturally occurring underground reserves in the Rocky Mountains to the Permian Basin. Kinder Morgan and its customers inject gas into conventional oil fields through a process known as enhanced oil recovery (EOR) to increase pressure and increase oil production. Kinder Morgan makes money by selling carbon dioxide, oil and natural gas liquids.
Kinder Morgan believes it can leverage its expertise in carbon dioxide transport and utilization to seize opportunities in the CCUS market. The company established a new business unit, New Energy Ventures, in 2021 to pursue commercial opportunities from the low-carbon energy transition. Since then, we have focused on growing our leading renewable natural gas platform. However, the company believes commercial opportunities for his CCUS will emerge over the next five years.
Tax credits that come into effect in 2027 will make carbon capture more economical for large industrial facilities and power plants. This gives Kinder Morgan the opportunity to reuse existing pipelines (and build new ones) to transport captured carbon to his EOR site or sequester it in other underground formations. can do.
Potentially Huge Market Opportunity
The oil industry believes that CCUS will grow into a huge market in the coming decades.oil giant exxon mobil (XOM -0.19%) expects CCUS to be a $4 trillion market by 2050, about 60% of the projected oil and gas market size by that year.Meanwhile, rival Occidental Petroleum (oxy -0.90%) believes CCUS could be a $3 trillion to $5 billion market opportunity. As such, the company ultimately estimates that he will be as profitable with CCUS as it is with current oil and gas production.
As such, both companies are investing heavily in the CCUS opportunity. Occidental is investing $1.1 billion to build the first large-scale Direct Air Capture (DAC) project in the Permian Basin. He uses carbon dioxide captured from the atmosphere for EOR. The company envisions building 100 of his DAC facilities by 2035 and has already started commercializing the first projects.carbon removal credits airbus The Houston Texans while agreeing to supply net-zero oil to SK Trading.
Meanwhile, ExxonMobil has signed the largest commercial deal of its kind with the world’s leading hydrogen and nitrogen products manufacturer. CF IndustriesIn this landmark transaction, Exxon will capture up to 2 million tons of carbon dioxide from CF Industries’ manufacturing facility in Louisiana. Exxon will transport the captured carbon through its own pipelines. EnLink Midstream In the isolation hub under development.
EnLink is one of several midstream companies looking to capitalize on the CCUS opportunity by reusing underutilized pipelines and building new ones for the purpose of transporting captured greenhouse gases. It’s one.middle class giant Enterprise Product Partner (EPD -0.78%) When embridge (ENB -0.19%) has partnered with Occidental Petroleum to explore potential carbon dioxide transport and sequestration solutions, each with extensive existing infrastructure. The Enterprises are collaborating on a region-focused project from Houston to Beaumont/Port Arthur, and Enbridge is looking to develop solutions in the Corpus Christi area. Kinder Morgan also has extensive infrastructure in the Gulf region, making it an ideal partner for major oil companies seeking CCUS solutions.
Potentially Epic Growth Driver
Kinder Morgan’s growth-related spending has declined in recent years due to heightened uncertainty about the future of fossil fuels, slowing its growth rate. However, it could accelerate again if his CCUS market develops as many oil companies expect. This will significantly extend the life of existing fossil fuel operations while also providing opportunities to reuse pipelines and build new pipelines dedicated to transporting greenhouse gases. This fantastic upside opportunity makes Kinder Morgan even more appealing. Because it can give the company more fuel to grow its dividend yielding around 6%.
Matthew DiLallo has held positions at Enbridge, Enterprise Products Partners, and Kinder Morgan. The Motley Fool invests in and recommends Enbridge and Kinder Morgan. The Motley Fool recommends Enterprise Products Partners. The Motley Fool’s U.S. headquarters has a disclosure policy.