Citadel Books More US Rockies Gas Transport on Key Pipeline

(Bloomberg) -- Citadel Energy Marketing, the merchant trading arm of Ken Griffin’s Citadel, has expanded its natural gas pipeline transportation capacity on a key interstate conduit from the Rocky Mountains to Arizona by 37%, positioning itself ahead of anticipated growth in Southwest gas demand.

The increased capacity allows Citadel to pick up the gas in Colorado’s Piceance Basin and deliver it to two different points in Arizona near California’s southeastern border. As of April 1, the company holds approximately 100 million cubic feet per day of transportation capacity on Kinder Morgan’s El Paso Natural Gas Pipeline through March 2031. That’s up from about 73 million cubic feet per day at the start of the year, according to company data analyzed by Bloomberg.

The expansion comes as analysts forecast growing gas demand to generate electricity for AI data centers in Arizona, with the state becoming “a quickly growing hotspot for data center development,” according to a BNEF report.

At the same time, some of the gas currently serving the Southwest market, from the Permian Basin of West Texas and Southeast New Mexico, is set to be redirected east toward a wave of liquefied natural gas export terminals being built on the US Gulf Coast this decade. That could create a vacuum of gas supplies in the Southwest, “creating a competitive opportunity for Rockies gas supply to step in,” according to an April report from consultancy Wood Mackenzie.

While higher extraction costs have kept Rockies supplies from growing at the same pace as larger basins near the Gulf Coast and Northeast, “suddenly it looks like a case of ‘right place, right time, right economics’ for Rockies gas,” Wood Mackenzie said.

Gas trading has been a key driver of profits for Citadel. Traders have been increasingly drawn to the physical US gas market in recent years as heightened volatility rewards those with the ability to transport and store molecules, allowing them to take advantage of arbitrage opportunities not always available to strictly financial traders.

Citadel declined to comment for this story.

(Updates with context on extraction costs in the fifth paragraph.)

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