AI boom to fuel natural gas demand in coming years, report says

April 25, 2024

Originally published by Reuters. Reporting by Sourasis Bose in Bengaluru; Editing by Ravi Prakash Kumar
April 23 (Reuters) – A spike in power usage from artificial intelligence (AI) data centers could significantly boost natural gas demand in the second half of the decade, analysts at investment banker Tudor Pickering Holt & Co said in a report on Tuesday.
As much as 8.5 billion cubic feet per day of natural gas could be required additionally to match the rise in demand, the report added.

WHY IT’S IMPORTANT

U.S. power and technology companies have expressed concerns that the country’s electrical systems are not expanding fast enough to meet the rapidly growing power needs of technology such as Generative AI, prompting data center businesses to sometimes bypass utilities and strike deals directly with power producers or build their own supply.
The uptick in overall demand has added to a nationwide queue of requests for power generation and energy storage projects to connect to the grid, which swelled to 2,600 gigawatts in 2023 from 2,000 gigawatts in 2022, according to the latest data from Lawrence Berkeley National Laboratory.

CONTEXT

According to the report, natural gas prices could average $4 per million British thermal units during the second half of the decade.
Natural gas prices touched a three-and-a-half-year low in February to $1.61 per mmbtu largely due to mild winter weather, forcing many producers to curtail their production.
The analysts expect pipeline operators such as Kinder Morgan (KMI.N), opens new tab, Williams (WMB.N), opens new tab and Energy Transfer (ET.N), opens new tab to be in the best position to take advantage of the growing gas demand, while gas producers such EQT (EQT.N), opens new tab and Chesapeake Energy (CHK.O), opens new tab would also benefit.

BY THE NUMBERS

The report estimates current power demand from data centers at 11 gigawatts (GW), which, in the base case, is expected to grow to 42 GW by 2030.
The report added that, at its base case, around 2.7 bcfd of incremental natural gas would be required by 2030.