Energy Transfer (ET) reached a final investment decision (FID) on an expansion of its Transwestern Pipeline to serve growing natural gas demand in the Southwest region. The project will boost market access for Permian Basin supply and could sideline a competing pipeline proposal by Kinder Morgan (KMI).
ET announced the decision last Wednesday (Aug. 6). The $5.3B project, called the Desert Southwest expansion, will add 516 miles of 42-inch pipe from Texas to central Arizona and have a capacity of 1.5 Bcf/d. ET expects to bring the project into service by 4Q29.
Transwestern currently extends from the Permian through northern New Mexico and Arizona and terminates at the Southern California border (see map from East Daley Analytics’ new Permian Energy Path dashboard in Energy Data Studio). The pipeline receives gas from the Permian and San Juan basins and delivers most of its volumes to central Arizona and into Sempra Energy’s (SRE) SoCal intrastate system. Though not explicitly stated, the project appears to be a new lateral that would serve as a southern mainline for Transwestern that directly connects the Permian to the Tucson/Phoenix area, bypassing San Juan production.
ET took FID despite holding no open season for Desert Southwest. In its press release, ET said an open season would be conducted later in 3Q25, and left open the possibility that the pipeline could be expanded to accommodate demand beyond the 1.5 Bcf/d already declared.
Desert Southwest will help address a supply shortage East Daley Analytics has flagged in the Southwest. The West Coast Supply & Demand Report sees growing demand for data center development and the expected startup of ECA LNG on Mexico’s Pacific coast driving a regional imbalance of over 1.6 Bcf/d by YE2030.
The expansion would also add egress for Permian shippers, providing additional capacity that could increase competition for molecules and support higher Waha prices. East Daley has predicted changes ahead for the Permian as the gas market leans more heavily on the basin’s supply, and the ET project will support this transition.
Producers in the San Juan could also see benefits. Additional capacity could pull Permian flows off the existing Transwestern mainline, alleviating constraints that would open more capacity for San Juan molecules to move on the pipeline. Stronger Waha prices would also improve San Juan spreads, allowing producers in the San Juan more opportunity to compete. However, if Permian production builds into the additional capacity quickly, the San Juan could lose any edge it had when the project enters service.
Desert Southwest could prove a missed opportunity for KMI. The company has previously proposed its Bullet pipeline, which would follow a similar route to supply gas from the Permian to central Arizona, but has released little information on the project. A deck from KMI’s June customer meeting shows a similar greenfield pipeline called Copper State, but there is no mention of whether that pipeline is the same as Bullet or indeed is even one of KMI’s prospective projects.
For a closer look at the Southwest market, see East Daley’s West Coast Supply & Demand Report. – Ian Heming Tickers: ET, KMI.
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