Matthew Tobin, Kinder Morgan
Growing up in Cleveland, Matthew Tobin remembers his father working at Republic Steel.
“At that time, in the late 1970s and early 1980s, there was a lot of steel being produced in this country,” he said. “If you went into the valleys around Pittsburgh, you would see 30 or 35 blast furnaces working at the time. Now there’s precisely one.”
Tobin sees that situation as emblematic of the U.S., particularly in the Rust Belt.
“People say, ‘We just don’t make anything anymore.’ But those people have not visited the Houston Ship Channel,” he said.
Tobin, vice president of crude oil business development for Kinder Morgan Terminals, senses an air of excitement accompanying this southwestern productivity.
“You can feel the enthusiasm that’s here. I think what’s coming out of the Houston Ship Channel these days is competitive with anyplace else in the world,” he said, addressing the Petrochemical & Maritime Outlook Conference held recently in Pasadena, Texas. “We go head-to-head with anyplace, anywhere that’s producing product. You can feel the confidence in the ability to compete globally, which is not the story we were hearing 10 years ago. And that’s at $40 oil or $100 oil.”
Kinder Morgan, Tobin said, is “very much a support player” of that productivity, especially in the Ship Channel area.
In the beginning
Discussing Kinder Morgan’s history, Tobin noted the pipeline giant got its start in natural gas.
“It started out as 175 people and a $325 million enterprise here in Houston,” Tobin said.
Since that time, Kinder Morgan has grown to become the third-largest energy company in the U.S. with an enterprise value of $20 billion.
Kinder Morgan currently operates with five distinct business units, Tobin explained.
“We have 16,000 miles of pipeline across the U.S.” he said. “Roughly one-third of the natural gas that moves in the U.S. every day goes through a Kinder Morgan pipeline.” The company’s product pipelines move as much as 2.1 million or 2.3 million barrels a day of petroleum products across the U.S.
“We’re the largest independent mover of petroleum products,” Tobin added.
In addition to pipelines extending throughout the U.S., Kinder Morgan pipelines also cross into Canada.
“We’re taking Marcellus/Utica condensates and sending it up to Alberta,” he said. “That actually did have LPGs running down from Canada, but the pipeline in the ground in our world is meant to serve whatever market needs it the most. That was reversed just this past year, and now we’re sending natural gas up there.”
The company also runs the Trans Mountain Pipeline in the northern part of Alberta.
“This is running some 300,000 barrels a day of tar sands crude — ‘tar sands’ being the bad word there — going down into Vancouver,” Tobin said. “These oil sands are in huge demand globally, and we’ve got a project underway to expand that up to almost 900,000 barrels a day.”
Much the same way the Keystone XL pipeline faces regulatory challenges in the U.S., similar challenges face Kinder Morgan’s Canadian expansion.
“I realize we see pipelines all over the place. It is unbelievable how much is in the ground already, and it’s unbelievable to think that we need more,” Tobin said. “But we do, and we’ll do it in a smarter way.”
Tobin considers the technology behind the development of pipelines, especially the cross-channel pipelines, to be “almost revolutionary.”
“We can be really proud of what we do,” he said. “And we have a very high confidence level about what’s going in the ground right now, from a regulatory standpoint.”
Terminal success
A common theme dominating the Kinder Morgan story, Tobin said, is the “incredible amount of product making its way through the Gulf,” searching for a way to get to market.
“That’s a huge focus for our activity here,” he said. “With our storage terminals in the Ship Channel, our focus has been getting docks and having the ability to move the product from these facilities and off to destinations all over the world where we’re now competitive.”
While Kinder Morgan currently accommodates 136 million barrels of storage across the U.S. and Canada, the company maintains a highly visible profile in the Houston Ship Channel area with no less than 11 terminals.
In addition to its tanks and storage capacity, Kinder Morgan’s local assets include 12 ship docks, 12 barge docks, 20 inbound pipelines, 15 outbound pipelines and 13 cross-channel pipelines.
“Over the last couple of years, going back to 2011, we’ve spent about $2 billion in growth projects around the Ship Channel,” he said.
Kinder Morgan’s Galena Park facility has “an interesting history,” Tobin said.
“It was an old lubes plant, and it was bought out by General American Transportation (GATX), a terminal in Pasadena in the late 1980s or early 1990s,” he explained. “When we bought the Galena Park asset, it encompassed 14 terminals with GATX and two pipelines — one on the West Coast that runs out to Las Vegas and one connecting Tampa and Orlando.”
The Galena Park and Pasadena terminals were run independently and were relatively minor in scope, Tobin added. Thirty or so years later, that scope has changed considerably.
“Right now, we have 261 tanks around Galena Park that serve a diverse variety of clients,” Tobin said. “They used to be mostly chemicals, but not so much anymore. A lot of petrochemical and a lot of trading developed and has gone through the Galena Park hub.”
The development of Pasadena as a major player in the energy industry, particularly in terms of the transportation of energy products, also has an interesting backstory, Tobin said.
In the early 1960s, Gulf Coast refineries were challenged to find a way to transport product up to the New York Harbor.
“There was what they called the old ‘Inch System’ built back in World War II to avoid the German submarines, but it wasn’t up to the capacity it needed to be to get these products up to the Northeast,” Tobin said. “So they came up with the Colonial Pipeline idea earlier in the 1960s, and many of the major refineries here developed their own connection to this big, new system.”
But some companies preferred working together to establish their own connection.
“They signed a 30-year contract that allowed for the development of this little place called Pasadena, Texas, so product could make its way out,” Tobin said.
Since that time, Pasadena and the Houston Ship Channel area has become a world-class hub for moving oil and gas and petrochemical products.
“We’re now at the point where we have nearly 21 million barrels of storage capacity between Pasadena and Galena Park,” Tobin said. “It’s one of the largest refining complexes — not just storage facilities — in the world. And it’s there to continue to grow.”
One constraint the Houston Ship Channel faces, Tobin said, is the need to expand dock space.
“Between Pasadena and Galena Park, we are completely built out now,” he said. “There really isn’t any space to do anymore. We’re looking to find a way to do more, if we can.”
Splitting the difference
Kinder Morgan also operates a condensate processing splitter in the Houston Ship Channel area.
“A splitter takes condensates and separates it into four separate products: a naphtha product, an atmospheric gas, some LPGs and some kerosene, as well,” Tobin explained. “With the splitter, we can send those products out without any problem from the export ban and get right out to market.”
Tobin pointed out concerns the export ban potentially being lifted could prevent these products from getting to market and being competitive.
“I think there is a good bit of confidence in finding homes for these products, especially in South America where there seems to be a lot of demand and in the Far East, as well,” he said.
Kinder Morgan is currently developing three trains to move products generated by the splitter.
“We have two done, and we can run right at about 100,000 barrels a day,” Tobin said. “It’s supported by a line from the Eagle Ford field. They get product in, cut it up and send it out.
“It’s a neat project — really, the first one of its kind,” Tobin said. “There are a couple others that are being looked at in various spots.
“If we were to try to do this any other place in the country, I don’t think we could have pulled it off. There’s been a lot of support from the community, lots of support from the permitting agencies. But really, this is what we’re all about.”
The necessity of optionality
Tobin credits the Houston Ship Channel as the reason Kinder Morgan enjoys its broad customer base.
“The traders use the word ‘optionality,’” he said. “Optionality means they can do anything they want to do on any given day, but it can change tomorrow, and you better be ready to handle it.”
The Ship Channel provides that optionality to Kinder Morgan and others.
“In this way, we can get to a lot of places on the existing pipeline,” he said.
In closing, Tobin referred to Kinder Morgan’s founder, Richard Kinder.
“As Mr. Kinder would say, ‘We have been given a lot here,’” Tobin concluded. “We have a lot of responsibility on our hands. And I have four words for you: Don’t screw it up.”
For more information, visit www.kindermorgan.com or call (713) 369-9000.
