Kinder Morgan Expands Tanker Fleet for U.S. Jones Act Trade

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Kinder Morgan Inc. (KMI, Houston) is expanding its fleet of Jones Act product tankers and has signed a $568-million agreement with Philly Tankers LLC for the construction of four 50,000-deadweight-ton Tier II tankers. The vessels will be built at the Aker Philadelphia Shipyard in Philadelphia. The four new vessels will increase Kinder Morgan’s Jones Act tanker fleet to 16 ships by late 2017, of which 14 are under long-term contracts.

Each LNG-conversion-ready tanker will have a capacity of 337,000 bbl. The vessels will be delivered to Kinder Morgan between November 2016 and November 2017 and placed in U.S. domestic service, commonly referred to as the Jones Act trade. The first two that are scheduled for delivery, in late 2016 and early 2017, are under long-term contract to an oil company. Contract discussions for the two tankers to be delivered by
late 2017 are ongoing with other parties. Contracts are expected to be executed by early 2016.

“There continues to be strong demand for domestic waterborne transportation to move petroleum products and crude oil, and our fleet of highly efficient tankers will provide stable, fee-based cash flow to KMI shareholders for many years to come through multiyear contracts,” said John Schlosser, Kinder Morgan Terminals president. “This latest transaction clearly underscores Kinder Morgan’s commitment to marine transportation of crude oil, condensate, and refined products in the U.S. domestic trade.”

Kinder Morgan has seven product tankers on the water and five that are in various stages of design and construction at the NASSCO shipyard in San Diego, Calif., which are scheduled for delivery between late 2015 and mid-2017. Kinder Morgan entered the Jones Act product tanker business with an initial purchase of five ships in January 2014 with its acquisition of American Petroleum Tankers and State Class Tankers for $960 million.

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