Delegates attending the Gas, LNG and Future of Energy event in London this week heard that the US gas market is expected to grow another 40% or over 50 bcf, according to Wood Mackenzie forecasts.
“That’s a huge amount of growth,” said Eugene Kim, Research Director for Americas Gas. “Over the last 20 years, US gas production has more than doubled, and currently around 105 bcf a day, keeping prices relatively range bound within the $2-$4 bandwidth,” he said.
He said growth is coming from two areas. One is LNG exports, and the other newer form is coming from generative AI data centres.
“We had a decline power view, updated to a resilient ‘flattish’ and now have significantly adjusted our expectations for growth,” he said.
The big question then becomes whether suppliers can meet these demands.
“The answer is yes – with a caveat, and that’s prices which, in our view, will be going up. There are many reasons why, but a couple are resource economy, and oil prices. We see a significant decline in associated gas under a low oil price scenario. Higher cost resources will in general raise costs, along with market potential.”
Reflecting on President Trump’s pro-gas and technology agenda, and flurry of executive orders, he said the industry will have more access to resources, and there might be better streamlining of permitting not only for pipeline infrastructure but also LNG exports.
A focus on the US becoming a major or dominant player in AI requires significant electricity needs.
“The phrase ‘Drill, baby, drill’ is catchy but in reality these decisions are based on economics. Lower oil prices have led to a fall in oil-directed drilling. But overall, [the policies mean] the appetite for US LNG remains stronger than ever, especially when you consider certain nations are considering using LNG as a way to balance out trade imbalances that exist.”
He anticipates producers will continue to innovate, echoing the refrain of “don’t bet against the US”, he said resource allocation will continue to be crucial.
“You’ll have less and less low-cost resources in the ground to work with,” he said.
While many of the big tech forms want their facilities to be powered by clean energy, Kim said the key determinant is speed to market.
“How do I get my data centre on as quickly as possible, and scale it up in terms of 24/7 uptime, reliability and proven technology?” he said. “Gas fits the bill, and in the immediate future, we’ll see significant gas generation. We’re seeing that build up from utilities themselves.”
Developing new infrastructure such as pipelines will also add another layer of cost on top of gas prices. While LNG tends to be concentrated in the Gulf Coast region, the challenge with data centres is ’they are everywhere’. Kim said this will spur regional competition. Gas into power is set to drive growth in the south east and Midwest regions in particular.
“Competition for the molecule will grow stronger and stronger in the next 10 years,” he said.
“We’re tracking around 20 bcf a day of power in projects which are non-LNG related. We don’t go a day without another data centre announced – we are tracking around 92 GW of data centre pipelines, and that’s just in the US. That’s a significant amount of new capacity and shows the amount of interest that shippers have in securing gas volumes to feed into their gas generation.”
But he stressed that the magnitude of power demand growth, and the fuels that supply it, have a “very wide cone of uncertainty”. Around 40% of power demand used for data centres is for cooling purposes, creating major consumption and sustainability issues.
“With LNG demand growth, you have more of a line of sight, but power demand has more uncertainty. We’ll find out a lot in the next five years, whether it’s sustainable. Also remember that power demand isn’t just data centres – there is a lot of demand growth for chips and solar panel manufacturing, as part of the reshoring policy.”
