Data centers are expanding markets for gas pipeline projects otherwise struggling with commercial viability. Energy Transfer (ET) recently carried the Hugh Brinson Pipeline (formerly Warrior) across the finish line thanks to rising data center demand in the Dallas-Fort Worth area. East Daley is watching another Permian project proposed by Kinder Morgan (KMI) for a similar revival.
KMI’s greenfield Bullet Pipeline would effectively twin the South Mainline of the El Paso Natural Gas (EPNG) pipeline delivering Permian gas to the Southwest region. KMI has eyed the project for years, and occasionally mentions it in customer presentations. However, supply and demand fundamentals never supported expanding westbound capacity out of the Permian — until now.
East Daley Analytics’ Data Center Demand Monitor identifies ~7 GW of data center load capacity within 50 miles of the EPNG pipeline footprint, with ~5.5 GW located at the end of the South Mainline in Arizona. If all this load were served by natural gas, we estimate it would require ~1.1 Bcf/d of pipeline capacity.
On KMI’s 4Q24 earnings call, executives alluded to potential new demand in the region. Sital Mody, President of Natural Gas Pipelines, said KMI is “looking at some opportunities moving out west to the Desert Southwest, that might be an area where we can see some primary and secondary expansion opportunities."
The Data Center Demand Monitor tracks over 300 GW of power projects planned to serve US data centers. Arizona’s Maricopa County has become a focal point for development (see map from the dashboard). The largest planned data center in the county is Tract Data Center’s Buckeye campus, which EDA estimates will have a total facility load of 2.4 GW. Continued development in this region could solidify the commercial viability of KMI’s Bullet expansion.
EDA estimates the Bullet Pipeline would span 550-575 miles and have a diameter between 36-42 inches. We estimate a total cost of $1.5-1.8B at this scale, depending on the final length and diameter. Using a conservative 6.0x build multiple, the project could generate ~$250-300MM in annual EBITDA to KMI.
With data center demand reshaping the natural gas landscape, KMI’s Bullet Pipeline may soon become a necessary addition to energy infrastructure in the Permian and Southwest.
The Data Center Demand Monitor is available as part of the Macro Supply & Demand package. Reach out to East Daley to learn more. – Zach Krause Tickers: ET, KMI.
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