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Despite rapid geopolitical shifts, U.S. producers remain broadly disciplined and are waiting for long‑term price signals before materially increasing output, though Sanders said energy security concerns could eventually favor more U.S. production with the Permian central to that response (about 6.5 mb/d oil and ~23 Bcf/d associated gas).
Sanders argued geopolitics is supporting stronger U.S. LNG and pipeline demand—he cited ~2–3 Bcf/d of Middle East liquefaction offline and industry forecasts of roughly 19 Bcf/d U.S. gas market growth over 4–5 years (about 13 Bcf/d from LNG)—and noted Kinder Morgan moves roughly 40% of U.S. gas and liquefaction feed.
Kinder Morgan is positioning to capture that demand with a $10.1 billion sanctioned backlog and active projects including the under‑construction Trident Pipeline (2 Bcf/d, expandable +1 Bcf/d via compression, online late next year), the recently closed Monument acquisition (~$500M), and a 570 MMcf/d GCX expansion coming online this quarter.
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Kinder Morgan (NYSE:KMI) President Dax Sanders said U.S. producers have not broadly signaled a near-term shift in production plans despite the rapidly evolving geopolitical backdrop, but he argued longer-term energy security concerns could ultimately favor incremental U.S. production and infrastructure development.
Speaking in a Barclays-hosted fireside chat with analyst Theresa Chen, Sanders said producers remain disciplined and are “looking for really, you know, long-term price signals before making substantial changes.” He cited public commentary from Chevron CEO Mike Wirth indicating Chevron was not making changes at the time, while noting Diamondback had indicated plans to increase Permian crude production.
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Sanders said it was “pretty early to tell exactly what’s gonna change” in the long term as the news flow shifts “seemingly by the hour.” Still, he suggested sovereign risk considerations could prompt a reassessment of where global buyers source oil and gas, with the U.S. potentially benefiting if regions such as the Strait of Hormuz are viewed as higher risk.
He framed the Permian Basin as central to any U.S. response, estimating U.S. oil production at roughly 13.5 million barrels per day, with about 6.5 million barrels per day from the Permian. He also described the Permian as producing about 23 Bcf/d of natural gas, emphasizing the “associated gas” dynamic tied to oil-directed drilling and the need for takeaway capacity.
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On LNG, Sanders said the global ecosystem is roughly 60–65 Bcf/d when adjusting for utilization. He also said that, based on the “best numbers” he had seen, roughly 2–3 Bcf/d of liquefaction capacity in the Middle East from Ras Laffan/North Field was offline and could be out for 3–5 years, while cautioning that situation could change quickly.
Sanders said Kinder Morgan expects continued growth in U.S. natural gas demand, particularly from LNG. He cited Wood Mackenzie estimates that the U.S. gas market—roughly 115–116 Bcf/d—could grow by about 19 Bcf/d over the next four to five years, adding that Kinder Morgan’s internal view is “a little bit more bullish.” He said LNG growth accounts for about 13 Bcf/d of that projected increase.
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Sanders also pointed to potential implications for LNG project development and ownership structures, referencing Golden Pass LNG and noting its ownership split (30% Exxon, 70% the government of Qatar). He suggested the recent geopolitical environment could influence development decisions.
On Kinder Morgan’s positioning, Sanders said the company operates what he described as the largest natural gas network in the U.S., transporting “about 40% of all the gas around the United States” and “about 40% of the liquefaction capacity or gas going into liquefaction.” He said Kinder Morgan has a $10.1 billion board-approved project backlog with binding agreements, with about 60% related to power and about 20% related to LNG.
Among LNG-related projects, Sanders highlighted the Trident Pipeline, a 2 Bcf/d project originating in Katy, Texas, running north of Houston to the Texas-Louisiana border and tying into Kinder Morgan’s network. He said Trident is under active construction and is expected to start coming online toward the end of next year, reaching full run-rate afterward. He also said Kinder Morgan expects to be able to expand Trident by an additional 1 Bcf/d through added compression if demand warrants, and that compression expansions can typically be executed faster than greenfield pipeline builds.
Sanders distinguished between Kinder Morgan’s sanctioned backlog and what he called its “shadow backlog,” described as projects under active development and customer conversations but not yet board-approved and without signed definitive agreements. He said the shadow backlog is not “a hope and a prayer” but does include competitive situations where the company may or may not win the work.
He said the shadow backlog “looks a lot like” the sanctioned backlog, with significant potential demand tied to power, including drivers such as demographic shifts, migration into the U.S. Southeast, coal-to-gas switching, reshoring of industrial demand, and data centers. He emphasized that contracts are generally with utilities rather than data center operators directly, and he described those utilities as typically investment-grade.
Sanders pointed to areas where Kinder Morgan sees opportunity, including the U.S. Southeast (through Southern Natural Gas, a joint venture with Southern Company), the Desert Southwest (via the El Paso Natural Gas system), and the mid-continent (through its stake in Natural Gas Pipeline Company of America).
Asked about a SoftBank-led consortium tied to data center development in Ohio, Sanders said Kinder Morgan was named in a memorandum of understanding associated with the group and was “thrilled” to be involved, noting the company was the only midstream operator cited. However, he stressed there are no signed agreements and nothing from the consortium is included in Kinder Morgan’s backlog or shadow backlog.
On M&A, Sanders discussed Kinder Morgan’s acquisition of the Monument Pipeline, which he said closed the prior week for “just north of $500 million.” He described the asset as a short-haul pipeline near Houston that integrates with Kinder Morgan’s network and serves a small customer set including a major existing customer. Sanders said the company plans over time to shift an associated storage service from a third party to Kinder Morgan’s own storage assets, where it has unused capacity. He said the company’s build backlog implies an approximately 5.6x build multiple, while Monument is expected to be “sort of an eight times” asset in the medium term.
On Permian gas egress, Sanders said the basin is currently short takeaway capacity, pointing to the spread between Waha and Houston Ship Channel prices and noting Waha has been “pretty consistently negative.” He said Kinder Morgan has a 570 MMcf/d expansion of its GCX pipeline in the process of coming online, expected later in the quarter. He also referenced additional egress projects from other operators—citing Energy Transfer’s Hugh Brinson, Eiger, and others—estimating roughly 11 Bcf/d of additional capacity coming online. He added that if Permian oil production increases materially, associated gas growth could again tighten takeaway, and Kinder Morgan would be prepared to participate in potential new greenfield projects or looping expansions.
On liquids, Sanders said Kinder Morgan is in the process of bringing online a conversion of a historical crude oil pipeline out of the Bakken—running to Guernsey, Wyoming—into a natural gas liquids line. He said the company has discussed potential future phases but has not announced additional phases, while noting wells in the region are “getting a little bit gassier,” supporting incremental gas and NGL volumes.
Sanders also addressed the Western Gateway refined products project, developed with partner Phillips 66. He said Kinder Morgan’s expectations are “reasonably consistent” with initial views following a second open season he characterized as successful. He described the project as an effort to “completely change” refined products logistics in the Desert Southwest and California, citing California refinery closures and conversions to renewable diesel as drivers. The concept includes reversing flow on an existing pipeline to move product from PADD 2 and the Texas Gulf Coast west into the Phoenix area, then supplying California from Phoenix. Sanders said the next step is negotiating a joint venture with Phillips 66, which he said the companies are working on and are “optimistic” about completing.
Discussing the value of refined products assets if Western Gateway does not proceed, Sanders said Kinder Morgan’s pipelines in the region are “good cash flowing assets” with long-standing demand, favorable demographics in areas such as Maricopa County (Phoenix) and Clark County (Las Vegas), and tariff escalation tied to a Federal Energy Regulatory Commission index mechanism. He noted the FERC index had been reset for the next five years at roughly “minus -0.5%” off the Producer Price Index, which he said is “substantially positive.”
Finally, Sanders said Kinder Morgan remains primarily a fee-based energy infrastructure business but has limited “torque around the edges,” including exposure through its CO2 tertiary oil production business (which he said generates about $300 million per year of free cash flow and is largely hedged), transmix and blending activities, certain gathering and processing assets, and export docks that handle refined products exports, which he said are running close to full capacity. He also pointed to higher utilization across the natural gas grid, saying the company’s network utilization rose from about 74% in 2016 to “at or north of 90%” today.
Kinder Morgan (NYSE: KMI) is a large energy infrastructure company that owns and operates an extensive network of pipelines and terminals across North America. Its core activities center on the transportation, storage and handling of energy products, including natural gas, natural gas liquids (NGLs), crude oil, refined petroleum products and carbon dioxide. The company's assets include long-haul and gathering pipelines, storage facilities, and multi-modal terminals that serve producers, refiners, utilities and industrial customers.
Kinder Morgan's operations deliver midstream services such as pipeline transportation, terminaling, storage and related logistics and maintenance.
The article "Kinder Morgan’s Sanders: Producers Stay Disciplined as Geopolitics Boost U.S. LNG, Pipeline Demand" was originally published by MarketBeat.