Energy Transfer approves $5.3B pipeline expansion

Energy Transfer LP has made a positive final investment decision (FID) on a $5.3 billion expansion of its Transwestern Pipeline system, a major infrastructure buildout aimed at meeting the rising demand for natural gas across Arizona and New Mexico.

The Desert Southwest expansion project will add 1.5 billion cubic feet per day (Bcf/d) of new pipeline capacity from the Permian Basin to Southwestern markets through a 516-mile, 42-inch pipeline and nine compressor stations. The project is expected to enter service by the fourth quarter of 2029.

Backed by long-term commitments from investment-grade shippers, the project is designed to serve growing load from utilities, energy providers, high-tech manufacturing, and data centers in one of the fastest-growing population corridors in the U.S.

“This expansion will provide reliable and economic natural gas supplies to support long-term energy needs across Arizona and New Mexico,” Energy Transfer said in a statement, citing demand drivers such as population growth and industrial expansion.

The new pipeline will stretch across Texas, New Mexico, and Arizona, building on the legacy of the original Transwestern system, which has served the region since 1960. Energy Transfer said the expansion will increase system reliability and optionality for shippers while leveraging its premier position in the Permian Basin.

The project’s $5.3 billion capital cost includes approximately $600 million in Allowance for Funds Used During Construction (AFUDC). An open season for the remaining project capacity is expected to launch this quarter. Depending on shipper response, Energy Transfer may consider a scalable expansion beyond the current 1.5 Bcf/d design.

In a nod to domestic content and labor priorities, Energy Transfer said the project will prioritize U.S.-made steel and is expected to create up to 5,000 local and union labor construction jobs during the buildout period.

The Desert Southwest expansion further cements Energy Transfer’s role as one of the country’s largest midstream operators. The company owns and operates approximately 140,000 miles of pipelines and related energy infrastructure across 44 states, with connections to nearly 200 natural gas-fired power plants.

Its strategic footprint includes assets in all major U.S. supply basins and links to key demand centers for natural gas, natural gas liquids, refined products, and crude oil. In addition to its core midstream operations, Energy Transfer holds major stakes in Sunoco LP and USA Compression Partners, and owns Lake Charles LNG Company.

The company emphasized that the new pipeline will enhance its ability to capitalize on supply growth in the Permian while helping customers in the Southwest meet growing energy and environmental requirements.