Kinder Morgan Inc. recently announced plans to convert a portion of an existing crude-oriented facility in Louisiana into a renewable feedstock storage hub, which analysts say will bolster Kinder Morgan’s energy transition push.

The Houston-based pipeline operator has made strides so far this year in the energy transition space including its entry into renewable natural gas (RNG) through a $310 million acquisition of Indianapolis-based Kinetrex Energy, which Kinder Morgan closed last month.

“While likely not a major equity needle-mover in isolation, we see the announcement as an attractive opportunity for KMI to broaden its energy transition product offering alongside the prior acquisition of RNG/LNG producer Kinetrex earlier this year without deviating from the company’s terminal and pipeline wheelhouse,” analysts with Tudor, Pickering, Holt & Co. (TPH) wrote in a Sept. 14 research note.

As part of its plans to retrofit its terminal assets, Kinder Morgan formed a partnership with Neste, one of the leading providers of renewable and circular solutions. The companies expect the partnership to further improve the lifecycle climate benefits and competitiveness of Neste’s renewable products in the long-term.

According to a company release from Kinder Morgan, Neste’s renewable products have already prevented over 40 million tons of new greenhouse-gas (GHG) emissions from entering the atmosphere over the last five years. This equates to the same climate benefits as building 8,300 wind turbines or making 10.8 million cars zero emission according to the U.S. EPA’s GHG calculator, the release said.

“We are thrilled to partner with Neste, a global leader in renewable fuels, on this important logistics project,” commented John Schlosser, president of Kinder Morgan Terminals, in the release on Sept. 13.

“As North America’s largest terminal operator,” Schlosser continued, “with existing infrastructure including 80 million barrels of storage, 266 docks, 462 truck bays and 6,800 rail car spots, Kinder Morgan Terminals is uniquely positioned to play a leading role in the transition to renewable fuels.”

As part of the initial, committed phases of the project with Neste, Kinder Morgan will modify existing tanks and piping located at its Harvey, Louisiana facility to enable segregated storage for a variety of raw material across 30 tanks. The scope of work also includes the installation of a new boiler for heating tanks and railcars and infrastructure improvements for rail, truck and marine movements.

Though explicit capital requirements were not provided, the TPH analysts noted that Kinder Morgan did message plans to finance the project internally while Neste maintains an option to upsize the project’s scope.

Upon completion of the project, Kinder Morgan’s Harvey, Louisiana facility will serve as the primary hub where Neste will store a variety of raw materials including, for example, the used cooking oil it collects from more than 40,000 restaurants across the U.S.

The project, which is supported by a long-term commercial commitment from Neste—one of Neste’s largest to date in the U.S., is expected to commence operations in first-quarter 2023.

“This clearly shows the positive role America’s existing energy infrastructure can play in creating a sustainable future and fighting climate change,” Jeremy Baines, president of Neste U.S., said in the release on Sept. 13. “Neste and Kinder Morgan are transforming existing terminal assets into what can be considered green infrastructure, which will ultimately enable more American businesses and cities to power their fleets and supply chains with renewable fuels and other products.”

Headquartered in Espoo, Finland, Neste is a leading producer of renewable diesel and sustainable aviation fuel. The company aims to help its customers reduce GHG emissions through its renewable and circular solutions, which refines waste, residues and innovative raw materials into renewable fuels and sustainable feedstock for plastics and other materials.

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