Energy Transfer takes FID on $1.6bn South Mississippi pipeline

Energy Transfer (TXSE: ET) has taken a final investment decision (FID) on the South Mississippi natural gas pipeline project. The FID was made at the start of November, according to the company’s third-quarter earnings, which were released on November 3.

The pipeline’s route will cover 215 miles (346 km), extending from a connection near the Perryville Hub in Louisiana to an interconnect on the Florida Gas Transmission (FGT) pipeline in southern Mississippi. Energy Transfer said it had secured sufficient long-term, demand-based transportation agreements to support the construction of a 36-inch (914-mm) pipeline with a capacity of 1.2bn cubic feet (34mn cubic metres) per day. Energy Transfer’s CEO, Tom Long, said on the company’s third-quarter earnings call that these agreements spanned 20 years.

Construction of the pipeline is estimated to cost around $1.6bn.

Energy Transfer anticipates that it will likely operate the project with a 51% interest, while shippers on the pipeline will account for the remaining ownership stake. The other potential owners have not yet been identified. The company said a binding open season was now underway to solicit additional customer commitments. The final size and capacity of the pipeline will be determined after the open season has been completed.

The South Mississippi project is targeted for start-up in 2030. Energy Transfer said that once the pipeline enters service, it will give shippers greater access to gas from multiple basins across the Southeastern US. Energy Transfer’s co-CEO, Mackie McCrea, noted on the company’s earnings call that the project would connect all of its pipelines that come into the Perryville area to the FGT system, which he said continues to grow.

“What it gives the markets, the shippers, the opportunity to do is to reach out to all the basins,” he said. “With the uncertainty in the future of where prices will go and where volumes will go, some of our customers on this project alone are reaching out to the Permian Basin, Haynesville and even up in the Marcellus-Utica.”

Later during the call, McCrea elaborated that one of the contracts supporting South Mississippi involved a long-term deal starting in 2029 for capacity out of Marcellus-Utica down the company’s Panhandle trunk line.

This comes as Energy Transfer and other pipeline operators scramble to add new gas transmission capacity to serve booming demand from LNG terminals on the US Gulf Coast, data centres and gas-fired power generation facilities, among other major gas users.