Williams greenlights Transco expansion to move more gas from Texas to Louisiana

Williams plans to move forward with its Texas to Louisiana Energy Pathway natural gas expansion project after securing sufficient long-term transportation commitments, company executives said in a May 3 earnings call.

The 364 MMcf/d expansion project on the Transcontinental Pipeline will primarily serve burgeoning LNG export demand along the Gulf Coast. Williams is anticipating the expansion to enter service in the fourth quarter of 2025.

The Texas to Louisiana expansion project builds on Williams' strategy of growth through brownfield capacity expansions, especially on the Transco Pipeline. Expansion projects have surged in popularity in recent years, as midstream operators seek to increase capacity without having to navigate an increasingly tough permitting environment for newbuild pipelines.

"We continue to set new records for contracted transmission capacity and expect this record-breaking performance to continue for many years to come as we execute on the six unique transmission expansion projects totaling 1.9 Bcf per day," CEO Alan Armstrong said.

Four of the six transmission expansion projects are located on infrastructure in the Northeast, a region that flirted with production exceeding takeaway capacity in late 2021.

Louisiana Energy Gateway

Amid the expansion project announcements, Williams executives indicated that progress was being made toward a final investment decision on a potential greenfield pipeline, the Louisiana Energy Gateway, that would move up to 1.8 Bcf/d of Haynesville gas south to Gulf Coast LNG export terminals.

"We are close to commercializing the Louisiana Energy Gateway project, and given significant interest by various shippers, we do expect to announce the final investment decision on that project soon," Armstrong said.

Senior Vice President of Corporate Strategic Development Chad Zamarin gave an update on the company's progress in signing transportation commitments for the project.

"We have over half of that contracted today, and we would expect to achieve a sufficient level of commercial contracts over the next couple of months to FID the project," Zamarin said. "We see a pretty significant need for volumes that are growing in the Haynesville to get to Gulf Coast markets."

While production volumes in the Haynesville are still well below takeaway capacity limits, infrastructure has not historically been developed to move natural gas south to LNG export terminals, necessitating new pipelines to serve growing demand from this sector, Zamarin said.

Rising costs for steel and labor have also presented a challenge for midstream companies contemplating new pipelines, but executives said that steps have been taken to mitigate some of those costs.

COO Michael Dunn said that Williams had been able to source surplus steel from cancelled projects to utilize in the Louisiana Energy Gateway project, which will help keep costs down amid the current inflationary environment.

Williams also secured multiple forms of support for the Louisiana Energy Gateway project through its mid-March acquisition of Trace Midstream's Haynesville assets. As part of the deal, Trace Midstream's parent company Quantum Energy Partners signed a Memorandum of Understanding to become an equity investor and partner in the Louisiana Energy Gateway project, potentially reducing Williams' capital expenditure on the project should the joint venture move forward.

For the quarter ended March 31, Williams recorded a net income of $379 million, or 31 cents per share, compared with a net income of $425 million, or 35 cents per share, in the corresponding quarter a year prior.