Executive Summary:
Infrastructure: Energy Transfer is expanding the capacity of the Desert Southwest project on Transwestern Pipeline, adding momentum to the boom underway in Permian gas pipelines.
Rigs: The US rig count increased by 1 for the week of Jan. 3 to 516 rigs.
Flows: US natural gas volumes in pipeline samples averaged 68.2 Bcf/d for the week ending Jan. 11, down 1.6% W-o-W.
Storage: Traders and analysts expect the EIA to report an 87 Bcf storage withdrawal for the week ending Jan. 9.
Infrastructure:
Energy Transfer (ET) is expanding the capacity of the Desert Southwest expansion on Transwestern Pipeline, adding momentum to the boom underway in Permian gas pipelines.
In mid-December, ET announced that Desert Southwest capacity will increase from an initial 1.5 Bcf/d to 2.3 Bcf/d. The company will expand the pipeline’s diameter from 42 to 48 inches to create the additional capacity.
ET had previously indicated in its 3Q25 earnings that it was considering upsizing the project, after a strong open season received significant interest above the initially planned capacity.
Desert Southwest will incur an additional $0.3B cost for the larger pipe, bringing the estimated construction budget to $5.6B. With no changes to the initial timeline, ET still expects Desert Southwest to enter service in 4Q29.
The announcement made no mention of changes to the project’s route, indicating the pipeline still expects to deliver gas to six counties across southern New Mexico and Arizona.
Desert Southwest may see more updates ahead. ET left open the possibility of increasing the announced 2.3 Bcf/d capacity. The final scope will depend on the final compression configuration, and that “ultimate capacity … will be based on market demand.”
The Desert Southwest upsize keeps momentum in the boom for new Permian gas takeaway. East Daley now estimates over 11 Bcf/d of new egress capacity through 2030, based on projects with a final investment decision (FID) and including the recently expanded Matterhorn line. Along with Desert Southwest, Eiger Express (+3.7 Bcf/d), Blackcomb Pipeline (+2.5 Bcf/d) and ET’s Hugh Brinson Pipeline (+2.2 Bcf/d) are scheduled to start through 2027.
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Desert Southwest will also help meet growing gas demand across the Southwest, driven by population growth and data center development. In the Data Center Demand Tracker, East Daley is currently tracking nearly 15 GW of announced data center load in Arizona alone by 2032, which could require as much as 950 MMcf/d of new gas supply.
With existing pipelines supplying the region already operating at or near capacity seasonally, more capacity is needed in the coming years, and Desert Southwest is well suited to meet that demand.
Rigs:
The US rig count increased by 1 for the week of Jan. 3, bringing the total rig count to 516. The Marcellus–NE PA (-2), Marcellus+Utica (-1) and Bakken (-1) lost rigs while the DJ (+2), Eagle Ford (+1) and Permian (+1) basins gained rigs W-o-W.
At the company level, EnLink (-3), WMB (-2), ET (-1), PSX (-1), MPLX (-1), Producers Midstream (-1), XTO Energy (-1), Hess Corp. (-1) and XOM (-1) lost rigs while TRGP (+4), ETRN (+2), OKE (+1), Salt Creek Midstream (+1) and Fasken Oil & Ranch (+1) gained rigs W-o-W.
See East Daley Analytics’ weekly Rig Activity Tracker for more information on rigs by basin and company.
Flows:
US natural gas volumes in pipeline samples averaged 68.2 Bcf/d for the week ending Jan. 11, down 1.6% W-o-W.
Flows in major gas basins declined 1.8% W-o-W to 41.6 Bcf/d. The Haynesville sample fell 6.1% to 9.1 Bcf/d, while the Marcellus+Utica declined 0.3% to 31.8 Bcf/d. The Barnett sample jumped was 7.5% lower W-o-W.
Samples in liquids-focused basins also decreased 1.5% to 19.0 Bcf/d. The Permian sample declined 1.5% to 6.2 Bcf/d, and the Eagle Ford sample increased 4.5% W-o-W.
Storage:
Traders and analysts expect the Energy Information Administration (EIA) to report an 87 Bcf storage withdrawal for the week ending Jan. 9. An 87 Bcf draw would bring the surplus to the 5-year average up to 90 Bcf from 31 Bcf last week. The deficit to last year flips to a surplus of 17 Bcf vs the 5-year average, an indicator that a price decline is justified due to widespread mild temperatures so far this winter.
According to XWeather (formerly Maxar), January gas-weighted heating degree days (GWHDDs) should come in about 6% below the 10-year norm and an astounding 20% below last year’s levels. While GWHDDs are not as low as in January 2023, the delta to the 10-year normal is concerning from a demand perspective.
The forward curve edged upward mid-week due to short-covering, a brief respite from warm weather for a 5-day period at the end of the month, and persistent LNG feedgas. The market is still waiting on new structural demand growth in the form of new LNG liquefaction capacity, expected from Golden Pass this month and buttressed by progress on Train 5 of the Corpus Christi Stage 3 expansion. As these facilities layer in, we may see a pop in spring shoulder season demand to justify a higher price strip.
See East Daley’s latest Macro Supply & Demand Report for more analysis on the winter market outlook.
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