AI Growth expected to Increase Natural Gas Demand

According to a report released by Tudor Pickering Holt & Co. (via Reuters) on Tuesday, the surge in power consumption by AI data centers will have dramatic effects. It is likely to increase the demand for natural gas in the latter half of the decade. Analysts predict that an additional 8.5 billion cubic feet per day (bcfd) of natural gas may be needed to meet this growing demand.

The rising need for power is a concern for U.S. power and technology companies. They fear that the country’s electrical systems are not growing fast enough to keep up with the escalating power requirements of advanced technology like Generative AI. To cope, data center businesses are sometimes bypassing traditional utilities.

They are either making deals directly with power producers or building their own power supplies. The overall increase in demand has resulted in a significant rise in the number of requests for power generation and energy storage projects. These requests have increased from 2,000 gigawatts in 2022 to 2,600 gigawatts in 2023, based on data from Lawrence Berkeley National Laboratory.

Natural gas prices are expected to average $4 per million British thermal units (mmbtu) in the latter half of this decade. Prices dropped to a low of $1.61 per mmbtu in February, a three-and-a-half-year low, mainly because of mild winter weather. This price drop led many producers to cut back on production.

The report suggests that pipeline operators like Kinder Morgan, Williams, and Energy Transfer are well-placed to benefit from the increased demand for natural gas. Gas producers such as EQT and Chesapeake Energy are also expected to gain from this trend.

Date centers currently need about 11 gigawatts (GW) of power. By 2030, this demand is projected to grow to 42 GW in a base case scenario. By the same year, the report estimates that an additional 2.7 bcfd of natural gas will be necessary to support this increased power demand.

Image: DIW-Aigen

Read next: Threads Overtakes X In Daily Active User Count
Previous Post Next Post