According to the Energy Information Administration estimates, the demand for oil will grow by 0.9 million barrels per day, or bpd, in 2013 and 1.2 million bpd in 2014. To meet this demand, the production of oil will rise by 0.6 million bpd in 2013 and 1.8 million bpd in 2014. With this production increase, it’s anticipated the oil industry will increase revenue by 3% in 2013.
Looking at the growth of this sector, there are three companies that have sustainable growth opportunities in the upcoming years. In order to keep market share, these companies are planning to expand either through acquisitions or by increasing drilling activities.
Expansion initiative
Kinder Morgan Energy Partners LP (NYSE:KMP) acquired Copano Energy in March 2013 for $5 billion. The acquired company has a large amount of gas accumulation, sequencing, and transmission set up at key shale gas basins located in Texas, Oklahoma, and Wyoming. Copano operates almost 6900 miles of pipeline, with efficient natural gas transportation of approximately 2.7 billion cubic feet, or bcf, per day. It has nine processing plants with more than one bcf per day processing capacity of natural gas.
Additionally, Kinder Morgan Energy Partners LP (NYSE:KMP) plans to spend $11 billion total on expansion. $5.4 billion is projected for the Trans Mountain project pipeline and $2 billion for the Freedom Pipeline. The Trans Mountain pipeline, with a length of 1.15 kilometers from Edmonton to the Westridge Terminal, is located in Burnaby Canada.
The company plans to almost triple its capacity from 300,000 bpd to 890,000 bpd by 2017 in the Trans Mountain pipeline. Kinder Morgan Energy Partners LP (NYSE:KMP) is expecting to generate revenue of more than $1 billion per year from this plan, as it will receive almost $5 per barrel as the ”toll.”
It has also scheduled the construction of the Freedom pipeline in June 2015, which will be supplying crude oil to the western part of the U.S. This pipeline will start operating late in 2016 with a capacity of 200 million bpd.
Joint venture
Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) announced a joint venture with MDU Resources Group Inc (NYSE:MDU) to construct and run a diesel refinery in February 2013. This venture will be known as Dakota Prairie Refining. The refinery will be spread throughout 318 acres in the southwest region of North Dakota with a cost of around $300 million.
Construction is scheduled for the second quarter of 2013, and its operation will start in the fourth quarter of 2014. MDU will invest $150 million in this venture, Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) plans to contribute $75 million, and another $75 million will be from an unsecured, syndicated term loan. The companies will share profits equally. The process capacity of this refinery will be 20,000 bpd of Bakken crude oil.
Calumet Specialty Products Partners, L.P (NASDAQ:CLMT) completed the acquisition of the San Antonio refinery of NuStar Energy L.P. (NYSE:NS) for $115 million on Jan. 2, 2013. With this acquisition it will add finished gasoline in its product range and refinery to explore crude oil. The San Antonio refinery is located in San Antonio near the Eagle Ford Shale and will add 14,500 bpd to the production capacity of Calumet.
