The company cited rising costs and concerns over a potential global LNG oversupply as key reasons for the decision. In a statement, Energy Transfer said it will prioritize funding for natural gas pipeline projects, which the company views as offering superior risk-adjusted returns. It also left the door open for discussions with third parties interested in developing the Lake Charles LNG project.
A person familiar with the project said Energy Transfer executives had grown increasingly cautious as the facility neared completion, emphasizing that the company sees itself primarily as a pipeline operator rather than an LNG-focused developer. While offtake agreements for Lake Charles LNG were designed to protect the company from a supply glut, the slowdown in contracting across the LNG market and declining contract rates has put pressure on margins for developers, analysts noted.
Lake Charles LNG had been projected to have a liquefaction capacity of 16.45 million metric tons per annum (mtpa) and counted major customers such as Chevron. In June, Energy Transfer had agreed to supply Chevron with an additional 1 mtpa, bringing total contracted volumes to 3 mtpa.
Uday Turaga, founder of energy research firm ADI Analytics, said the suspension reflects broader trends in the LNG industry: “There is quite a bit of capacity out there, and way too many projects. Some more projects will wither away.”
Pipeline Expansion Gains Momentum
While suspending the LNG project, Energy Transfer announced an expansion of its Transwestern pipeline’s Desert Southwest project to meet growing demand. The expansion now targets a main pipeline diameter of 48 inches, up from 42 inches, boosting the project’s capacity from 1.5 billion cubic feet (bcf) per day to 2.3 bcf per day.
The estimated cost of the project has increased to about $5.6 billion, excluding allowance for funds used during construction, compared with a previous estimate of $5.3 billion, which included $600 million for construction allowances. The pipeline is expected to enter service by the fourth quarter of 2029.
Energy Transfer said the expansion is being driven by robust demand growth in the Desert Southwest, including the potential retirement or conversion of coal-fired power plants to natural gas. The company added that the ultimate capacity of the pipeline will depend on market demand.
The shift in strategy underscores Energy Transfer’s renewed focus on its core pipeline business, even as uncertainties in the global LNG market continue to weigh on developers.