Natural gas crash landed into a field of low prices and weak demand several years ago. Now, analysts say, the natural gas demand rocket is ready for relaunch.
“This is the most exciting and robust market we’re about to enter into that I’ve seen in my career,” stated Jack Weixel, senior director at East Daley Analytics during a webinar on the subject presented by Hart Energy.
Weixel showed a PowerPoint slide with four images that required three cubic feet of natural gas — per image — to create the equivalent of filling a volleyball.
Those data centers housing artificial intelligence, cloud storage, block chain and bitcoin are driving power demand, which will increasingly come from gas-fired electric generation plants.
His company forecasts U.S. natural gas production will climb to 105.4 Bcf per day by the end of the year, powered by output growth in the Haynesville and Permian Basin. Rising demand, combined with a storage deficit, should result in solid pricing this year, Weixel said. Summer prices are expected to average $4.40 per MMBtu, surpassing $4.50 in July as summer power demand persists and liquefied natural gas demand grows.
John Harpole, founder and president of Mercator Energy, forecast that total U.S. demand growth will grow 11.6 Bcf per day from 2024 to 2026 while natural gas supply will only grow 6.1 Bcf per day, leaving supplies 5.5 Bcf per day short of demand. Demand is expected to soar 104% to 55.7 Bcf per day by 2030, led by exports of LNG, demand from data centers and exports of U.S. natural gas to Mexico.
Lifting the freeze on new LNG export facilities will result in a doubling of export capacity from 11.5 Bcf per day in 2023 to 24.4 Bcf per day in 2028, he said. It will also underpin drilling activity, Harpole added.
“There will be demand for U.S. LNG in Asia and Europe,” he stated.
At 37.3 Bcf per day, the U.S. produces more natural gas than Canada, China, Iran, Norway and Qatar combined. And by itself, the Permian Basin is a natural gas superpower, he said.
“If the Permian Basin was a country, it would be the world’s fourth largest gas producer,” Harpole stated, trailing only the U.S., Russia and the State of Texas and outproducing Iran, China, Canada and Qatar
If oil prices fall to $40 a barrel, Weixel said it would be an “earthshaking” event for the natural gas produced along with Permian Basin crude. He said the Permian has a little insulation from low oil prices but not much. And he predicted that, if Permian Basin volumes fall as a result of low prices, the Marcellus, Eagle Ford and Haynesville would benefit.
