AI Data Center Boom to Drive Natural Gas Demand
The growing power usage from AI data centers is expected to lead to a significant increase in natural gas demand in the latter half of the decade. Analysts at investment banker Tudor Pickering Holt & Co project that an additional 8.5 billion cubic feet per day of natural gas may be required to meet this demand.
Concerns over Electrical Infrastructure
U.S. power and technology companies have expressed concerns about the adequacy of the electrical infrastructure to support the rapidly growing power needs of AI and other advanced technologies. This has prompted data center businesses to explore bypassing utilities and making direct deals with power producers or establishing their own power supply.
Surge in Power Demand
The increasing demand has contributed to a nationwide backlog of requests for power generation and energy storage projects to connect to the grid. According to Lawrence Berkeley National Laboratory, this backlog has grown from 2,000 gigawatts in 2022 to 2,600 gigawatts in 2023.
Natural Gas Prices and Beneficiaries
The report anticipates that natural gas prices could average $4 per million British thermal units in the second half of the decade. This is likely to benefit pipeline operators like Kinder Morgan, Williams, and Energy Transfer, as well as gas producers such as EQT and Chesapeake Energy.
Current and Projected Power Demand
Currently, data centers account for 11 gigawatts of power demand, which is projected to increase to 42 gigawatts by 2030 in the base case scenario. This translates to an estimated incremental natural gas requirement of around 2.7 billion cubic feet per day by 2030.
