SpaceX Plans to Build a Natural Gas Pipeline to Fuel Its Rockets. Here's What Energy Investors Need to Know.

Following its IPO and subsequent bond offering, Space Exploration Technologies (NASDAQ: SPCX) now has more than $100 billion in new capital at its disposal. Expect SpaceX to go on a massive spending spree to spur growth and justify its $2 trillion valuation.

What will SpaceX's spending focus on? Artificial intelligence will likely be the biggest beneficiary. More than 90% of SpaceX's claimed total addressable market is AI-focused. That means investors should expect the company to dramatically scale terrestrial data center construction. But SpaceX will also now aggressively pursue putting AI data centers into space -- so-called orbital data centers (ODCs).

ODCs will need many things to happen before they become a reality, one of which is successful commercialization of SpaceX's Starship megarocket. This megarocket -- which is significantly larger than the company's Falcon Heavy rocket -- would meaningfully improve SpaceX's ability to get larger payloads to space more affordably. ODCs, for example, could be launched at scale using Starship rockets.

One of SpaceX's biggest constraints on growth in this opportunity set, however, is access to rocket fuel. To solve that problem, SpaceX is reportedly looking to build its own natural gas pipeline. SpaceX may even look to produce its own natural gas over the long term.

How will this impact energy markets, and in particular, pipeline stocks? There are two factors to consider.

1. SpaceX's natural gas pipeline won't endanger pipeline stocks

According to data from the U.S. Energy Information Administration, natural gas pipelines deliver roughly 30 trillion cubic feet to nearly 80 million consumers each year. A single Starship launch, for comparison, uses around 630,000 gallons of liquid methane, which equates to around 0.0000521 trillion cubic feet of natural gas. Even if SpaceX launched 1,000 Starship rockets every year, it would still amount to less than 0.2% of U.S. natural gas demand transported by pipelines.

In short, SpaceX's actions aren't about to disintermediate conventional pipeline networks. In fact, SpaceX's actions could benefit certain pipeline networks in the long term.

Image source: Getty Images.

2. Pipeline stocks could actually benefit from SpaceX's actions long term

According to reporting from Reuters, SpaceX "plans to begin next month building an eight‑mile natural gas pipeline called 'Starpipe' to its Texas launch facilities." Construction is expected to conclude in January 2027.

Reuters observes:

Designed to be fully ​reusable, Starship uses about 630,000 gallons of liquid methane per launch, currently delivered by hundreds of tanker trucks in ⁠an hours-long process incompatible with Musk's expansion plans. Starship has completed 12 test launches since 2023, but Musk aims to ramp up to dozens, hundreds, and eventually ​thousands of launches a year.

Where will Starpipe's natural gas come from? SpaceX apparently wants to explore drilling for its own natural gas in the long term. But for now, it seems likely that supply will come from Enbridge's Valley Crossing Pipeline.

Pipeline stocks, therefore, won't be affected by SpaceX's foray into pipeline construction. Enbridge may even benefit directly, with other natural gas pipeline stocks benefiting from a new source of demand that could support prices over the long term, even if it remains a fraction of total U.S. demand.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enbridge. The Motley Fool has a disclosure policy.