Energy Transfer Weighs NGL-to-Gas Line Conversion as Permian Gas Demand Surges
Energy Transfer is exploring whether to convert a Permian NGL pipeline to natural gas service as gas demand accelerates and liquids markets soften.
(P&GJ) — Energy Transfer is evaluating whether to repurpose one of its Permian Basin natural gas liquids pipelines for natural gas service, a move that could capitalize on rising gas demand and shifting market economics, according to East Daley Analytics.
The company has not publicly identified the pipeline under review, but East Daley analysts point to the West Texas Gateway system as a likely candidate. Management indicated during Energy Transfer’s third-quarter 2025 earnings call that converting an NGL line to gas service could generate roughly twice the revenue compared with liquids transport, reflecting weak NGL tariffs and stronger gas fundamentals.
East Daley expects Permian NGL takeaway capacity to exceed demand as new liquids pipelines targeting Mont Belvieu come online, reducing utilization across existing systems. In contrast, gas infrastructure out of the basin remains in high demand as producers seek additional outlets, making pipeline conversion an increasingly attractive option.
If pursued, the conversion would align with a broader industry push to expand Permian gas takeaway. East Daley projects more than 10 billion cubic feet per day of new gas capacity through 2030 from projects that have already reached final investment decision, including multiple Energy Transfer developments. Several near-term projects are expected to enter service before 2027, with additional large-scale pipelines following later in the decade, as reported by East Daley Analytics.
West Texas Gateway is viewed as a practical conversion option due to its role and scale within Energy Transfer’s system. The 16-inch pipeline spans roughly 570 miles from West Texas to the Gulf Coast and has been in service since 2012. Any conversion would shift the line from hazardous liquids regulations to natural gas rules, triggering new compliance requirements related to operating pressure, class locations and integrity management under Pipeline and Hazardous Materials Safety Administration oversight.
East Daley estimates that a converted West Texas Gateway line could move a relatively modest volume of gas with added compression, producing moderate cash flow but requiring a long payback period. A larger-diameter segment of the Lone Star Express system could deliver significantly higher gas volumes and stronger returns, though that pipeline plays a more critical role in supplying Energy Transfer’s Mont Belvieu fractionation network, creating tradeoffs for the NGL business.
Overall, East Daley concludes that while larger pipelines offer better economics for gas service, West Texas Gateway may be the more realistic conversion candidate given the increasingly oversupplied NGL market and the strategic importance of Energy Transfer’s other liquids assets.