Energy Transfer suspends development of Lake Charles LNG export project in Louisiana

Energy Transfer has suspended the development of its proposed 16.5 million metric ton/year Lake Charles LNG export project in Louisiana, the company said Dec. 18.

The US pipeline giant announced the move in a brief statement, saying it made the decision "to focus on allocating capital to its significant backlog of natural gas pipeline infrastructure projects that Energy Transfer believes provides superior risk/return profiles." In a separate statement, the company said it has increased the diameter of its planned Desert Southwest Pipeline to 48 inches in response to strong demand in a recent open season.

The company suggested it would be open to turning the Lake Charles project over to another developer.

"Energy Transfer management has determined that its continued development of the project is not warranted by Energy Transfer but remains open to discussions with third parties who may have an interest in developing the project," the company said.

The decision to halt development of Lake Charles comes amid expectations of an LNG oversupply in the late 2020s and early 2030s, around the time the long-delayed project was expected to come online.

Energy Transfer did not immediately respond to a request for comment about its decision to suspend development, which marks an abrupt shift by the developer.

In early November, Energy Transfer said it was "very close" to realizing its target of signing 15 million-15.5 million mt/y of project volumes under long-term contract.

Some of the deals it had signed were preliminary agreements that the developer still needed to convert into binding deals.

Energy Transfer, which said it wanted to sell down about 80% of the equity in the Lake Charles project, had also said it was in advanced talks with potential partners. Energy Transfer co-CEO Marshall McCrea had described the targeted sell-down as "the last big, most important box" before launching the project, speaking during a Nov. 5 earnings call.

Counterparties included the US-based LNG player MidOcean, which is managed by EIG and backed by Saudi Aramco. Energy Transfer in April signed a preliminary deal that would have seen MidOcean commit to funding 30% of the construction costs of the project and receive the same share of LNG offtake from the facility, or about 5 million mt/year.

Earlier this year, Energy Transfer had expanded its long-term contract with offtaker Chevron to 3 million mt/year and signed a long-term deal with Japan's Kyushu Electric for 1 million mt/year.

This year, final investment decisions on new US liquefaction projects have already reached an all-time high. Six US LNG projects have reached an FID in 2025, bringing the total liquefaction capacity approved this year to around 60 million mt/y. US projects represent a majority of the 84 million mt/y to reach FID globally during the year.

Desert Southwest

Upsizing the Desert Southwest Pipeline from 42 inches to 48 inches will increase capacity to "up to 2.3 billion cubic feet per day, depending on final compression configuration," Energy Transfer said.

Desert Southwest is an expansion of the Transwestern Pipeline system. It involves roughly 516 miles of greenfield pipeline running from the Permian Basin in West Texas to the Phoenix area in Arizona. Its planned in-service date in the fourth quarter of 2029 is unchanged.

When Energy Transfer reached FID on the project in August, it planned for a 42-inch pipeline and a capacity of 1.5 Bcf/d. At the time, executives expressed confidence that it could be upsized, even though the original 1.5 Bcf/d had not yet been fully subscribed.

Energy Transfer increased the size after a supplemental open season. "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," it said. "The ultimate capacity of the Desert Southwest expansion project will be based on market demand."

Shippers on Desert Southwest include Arizona Public Service, Salt River Project and Arizona G&T Cooperatives.

The expansion will "enable us to meet the region's growing power needs and strengthen Arizona's energy infrastructure," Bobby Olsen, SRP's chief power system executive, said in the statement.