Kinder Morgan buys more Jones Act tankers in $568 million deal

An oil tanker navigates the Houston Ship Channel in Houston, Texas on Friday June 13, 2003. Photographer:  F. Carter Smith/ Bloomberg News.
An oil tanker navigates the Houston Ship Channel in Houston, Texas on Friday June 13, 2003. (F. Carter Smith/ Bloomberg News.)

HOUSTON — Midstream giant Kinder Morgan said Monday it will add four new tankers to its Jones Act-eligible fleet in a $568 million deal with Philly Tankers LLC.

The ships are slated to be delivered between late 2016 and 2017. The first two tankers scheduled for delivery are already under long-term contract with an unnamed oil company, and Kinder Morgan said it expects to have contracts for the second two ships inked by early 2016.

The Jones Act requires waterborne cargo shipped between domestic ports to be delivered on ships built in the U.S., owned by U.S. citizens and crewed by U.S. citizens. The limitations have helped to support an industry of maritime shippers dedicated to moving goods along U.S. coasts.

Kinder Morgan entered the Jones Act shipping business with a $960 million deal for five ships in January 2014. The company mostly ships petroleum products, and operates its ships by contracting them out to other companies in long-term deals.

The four additional ships will bring Kinder Morgan’s Jones Act tanker fleet to a total 16 ships when they’re all completed in late 2017. The Houston-based company has seven tankers already in service and five tankers in various stages of construction or design, Kinder Morgan said Monday.

The tankers acquired from Philly Tankers LLC will have a capacity of 337,000 barrels and can be converted to ship liquefied natural gas, the company said.

SHOW MORE