AI Power Surge Predicted to Drive Up U.S. Natural Gas Demand and Prices
A surge in Artificial Intelligence (AI) technology development is poised to significantly boost demand for natural gas in the United States, presenting lucrative opportunities for producers and shippers in the industry.
Investment bank Tudor, Pickering, Holt & Co forecasts that the rapid expansion of data centers, driven by the burgeoning AI sector, will lead to a substantial increase in electricity demand. While renewable energy sources like solar and wind are preferred by many tech companies, the imperative to swiftly construct and power these data centers is expected to drive up demand for natural gas as well.
This projected surge in natural gas demand raises questions about the feasibility of the current U.S. Administration’s goal to transition to 100% carbon pollution-free electricity by 2035. Natural gas, already the primary source of power generation in the U.S., is poised to play an even larger role as electricity consumption from data centers is anticipated to skyrocket to 42 gigawatts by 2030, up from 11 gigawatts presently.
According to a report from Tudor, Pickering, Holt & Co cited by Reuters, meeting this increased demand would require an additional 8.5 billion cubic feet per day (Bcf/d) of natural gas consumption. Consequently, U.S. benchmark natural gas prices could soar to as much as $4 per million British thermal units (MMBtu), more than double the current price.
While natural gas producers have been scaling back output due to market oversupply, they anticipate ramping up production later in the year to meet rising domestic power demand and LNG exports. Major players like EQT Corporation, Chesapeake Energy, and pipeline giants including Energy Transfer, Williams Companies, and Kinder Morgan are poised to reap the benefits of this heightened demand and price surge.
Kinder Morgan, for instance, remains optimistic about its natural gas transportation business, foreseeing substantial growth in demand driven by LNG exports, exports to Mexico, and increased usage in AI operations, cryptocurrency mining, and data centers.
Industry executives believe that natural gas will continue to play a crucial role in meeting America’s power needs, especially as new renewable energy installations require backup power generation. Toby Rice, CEO of EQT, highlights the burgeoning market for natural gas in powering data centers and AI technologies, underscoring the significant potential for growth in this sector.
With electricity consumption from data centers projected to rise dramatically, U.S. utilities and regulators are revising their forecasts for peak power demand, further underscoring the pivotal role natural gas is expected to play in the nation’s energy landscape.
Source: Oilprice.com
