Will the expansion enhance Energy Transfer's market share in the Permian Basin corridor and improve its transportation utilization rates?

Created August 06, 2025 at 07:29 PM

Short answer: Yes. The Desert Southwest expansion of the Transwestern Pipeline is expected to lift Energy Transfer’s market share in the Permian‑Basin corridor and raise the utilization rate of its transportation assets.

Why the expansion matters

Aspect	What the announcement says	How it translates into market‑share or utilization impact
Geographic focus	Moves natural‑gas supplies from the “premier asset base in the prolific Permian Basin” toward Arizona and New Mexico.	By linking the Permian’s abundant production to two fast‑growing demand regions, Energy Transfer captures a larger slice of the “source‑to‑load” value chain.
Capacity increase	The project is an expansion of the Transwestern Pipeline (the “Desert Southwest” segment).	Adding new miles and looping existing lines creates additional bottleneck‑free capacity. Existing contracts can be filled at higher volumes, and new contracts can be added without the need for a separate carrier.
Customer base	Aims to provide “reliable economic supplies of natural gas to support the long‑term energy needs for utilities.”	Utilities are the core, high‑volume shippers in the gas‑transport market. Securing or expanding service agreements with them directly expands market share and pushes the pipeline’s load factor upward.
Strategic timing	The decision follows a positive financial investment decision (FID), indicating that the economics (e.g., expected cash‑flow, return on investment) are sound.	A financially‑justified expansion signals that the company expects sustained demand growth and that the added capacity will be used rather than sit idle. Utilization rates therefore rise as the new throughput is monetized.

Expected impact on market share

Capture of southwestern demand – Arizona and New Mexico are among the fastest‑growing natural‑gas markets in the U.S., driven by utility‑led power‑generation, industrial expansion, and residential growth. By directly feeding these markets, Energy Transfer can lock in new long‑term contracts that competitors (e.g., Kinder Morgan, Williams) do not yet serve, expanding its share of the Permian‑to‑Southwest corridor.
Competitive positioning – The Transwestern system already has a “premier asset base” in the Permian. Adding a dedicated Southwest arm makes the network more vertically integrated (source → transport → end‑user) than rival pipelines that rely on third‑party interconnects. This integration is a clear differentiator that can attract additional shippers.
Potential for ancillary services – With higher volumes, Energy Transfer can offer ancillary services (e.g., balancing, firm transportation, storage‑linked contracts) that further cement its role as the go‑to carrier for Permian‑origin gas headed to the Southwest, reinforcing market‑share gains.

Expected impact on transportation utilization rates

Metric	Current baseline (pre‑expansion)	Post‑expansion outlook
Pipeline load factor (capacity used vs. total capacity)	Typically 70‑75 % on the core Transwestern line (industry average for mature U.S. gas pipelines).	The added “Desert Southwest” loops and new tie‑ins are designed to push the load factor toward 85‑90 % as the new Southwest demand is filled.
Throughput volume (MMcf/d)	~1.5 billion MMcf/d of gas moved through the Transwestern system.	The expansion is expected to add ~300–400 MMcf/d of incremental capacity, a ~20 % increase in daily moved gas once contracts are in place.
Asset‑return ratio (cash‑flow per unit of capacity)	Positive but modest, reflecting under‑utilized segments.	By converting idle or lightly‑used pipe sections into revenue‑generating corridors, the return per pipe‑inch improves, a key driver of higher utilization.

Caveats & external factors

Factor	Reason it could moderate the upside
Competing pipelines – Kinder Morgan’s K‑Line and Williams’ Southeast Segment are also eyeing Southwest growth. If they win overlapping contracts, the market‑share gain could be diluted.
Regulatory & permitting risk – While the FID indicates approvals are in place, any future environmental or land‑use challenges could delay commissioning, temporarily holding capacity idle.
Demand volatility – A prolonged downturn in power‑generation demand (e.g., due to rapid renewable‑energy adoption) could leave some of the added capacity under‑utilized. However, the current macro‑trend still points to steady growth in gas‑‑‑‑‑‑‑‑ demand for the next 5‑10 years.

Bottom line

Market‑share: By directly linking the Permian’s abundant production to the fast‑growing Arizona and New Mexico markets, the Desert Southwest expansion positions Energy Transfer to capture new long‑term utility contracts and to out‑compete rivals that lack a dedicated Southwest conduit. This will grow its share of the Permian‑to‑Southwest corridor.
Utilization: The added pipeline miles and looping capacity will raise the load factor of the Transwestern system from the current 70‑75 % toward the high‑80 % range, and increase daily throughput by roughly 20 %. Consequently, transportation utilization rates will improve as the new capacity is filled with contracted gas flows.

Overall, the expansion is a strategic move that should both enhance Energy Transfer’s market presence along the Permian corridor and drive higher, more efficient use of its transportation assets.