Energy Transfer Halts Lake Charles LNG Project, Shifts Focus to Pipeline Expansion
Energy Transfer has suspended development of its Lake Charles LNG export project as it reallocates capital toward major natural gas pipeline expansions, including an upsized Transwestern Desert Southwest project.
(Reuters) — On Dec. 18, Energy Transfer said it is suspending the development of its Lake Charles liquefied natural gas export facility in Louisiana to focus on allocating funds to natural gas pipeline projects.
The suspension comes as the company has been facing rising costs and amid fears of a looming global oversupply as new output comes online.
The pipeline and storage company said it remains open to discussions with third parties that may have an interest in developing the project.
Energy Transfer executives became nervous about Lake Charles LNG in the final stretch of development because the company still sees itself as pipeline operator rather than an LNG-focused company, said a person familiar with the project. Offtake agreements for Lake Charles LNG had been structured in a way to protect Energy Transfer from a potential glut in LNG supply, the person added.
Energy Transfer did not immediately respond to a request for additional comment. The company had previously said it would only give the facility the financial go-ahead if it sold 80% of the project to equity partners.
Transport Capacity
The Dallas-headquartered company on Dec. 18 also announced an increase in the transportation capacity of its Transwestern pipeline’s planned expansion project to meet additional customer demand.
The pipeline expansion project, called Desert Southwest, will now cost about $5.6 billion, excluding allowance for funds used during construction, Energy Transfer said. The project was previously expected to cost about $5.3 billion including $0.6 billion of allowance for funds used during construction.
The project’s main pipeline's diameter will be upsized from 42 inches to 48 inches, which will increase the project’s capacity to up to 2.3 billion cubic feet per day, Energy Transfer said. The design capacity of the pipeline was previously 1.5 billion cubic feet per day.
The pipeline is expected to be in-service by the fourth quarter of 2029.
"There is significant demand growth in the Desert Southwest region, including the potential to retire and or convert coal-fired power plants to natural gas, which could further benefit the project," the company said, adding that the ultimate capacity of the expansion project will be based on market demand.