Kinder Morgan Makes Strategic Move With Oilfield Acquisition In Texas

Kinder Morgan Makes Strategic Move With Oilfield Acquisition In Texas - Carbon Herald

Kinder Morgan, a pipeline operator in the US, has made a strategic move by acquiring oilfield assets in West Texas. The company is looking to take advantage of US carbon capture incentives to maximize production from these properties, according to sources familiar with the situation cited by Reuters.

The acquisition from Avad Energy Partners involves around 265 wells located in an established region within the biggest oilfield in the US, according to marketing documents from Avad and individuals with knowledge of the matter.

According to one source, the acquisition demonstrates how the $60 tax credit per metric ton for carbon sequestration under the U.S. Inflation Reduction Act is encouraging oil and gas transactions by making older oil-producing regions more appealing.

Relevant: Kinder Morgan Leases 10,800 Acres In Texas For Carbon Storage

The oilfield that Kinder Morgan acquired has been in operation since the 1920s and continues to produce around 1,100 barrels per day. The company reportedly spent approximately $100 million on the acquisition, highlighting their confidence in the value and potential of this deal. 

This move not only provides Kinder Morgan with access to additional oil reserves but also positions them well to take advantage of potential incentives in the future. By investing in established assets like this oilfield, Kinder Morgan is able to secure a foothold in a profitable sector of the oil and gas industry.

This acquisition is expected to significantly enhance the company’s oil production business in the region. Currently, Kinder Morgan operates a small oil production business that utilizes carbon dioxide injection to increase daily oil production to approximately 50,000 barrels. 

Read more: Kinder Morgan Announces Carbon Capture Deal With Red Cedar

Sources say that the U.S. tax credit for carbon sequestration has made the operations in the newly obtained field more profitable, further incentivizing the company to expand its presence in this industry.

The acquired oilfield includes 11,600 acres of land with the potential to further enhance oil production through the carbon dioxide injection technique. Additionally, Kinder Morgan intends to sell some of its older, traditional oilfields in the area in order to focus on properties with greater potential.

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