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AI Power Surge Fuels Demand for US Natural Gas

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AI Power Surge Fuels Demand for US Natural Gas

The rapid expansion of data centers powered by Artificial Intelligence (AI) technology is driving a surge in electricity demand, boosting the need for natural gas in the United States. This growing demand presents significant opportunities for natural gas producers and shippers, with expectations of higher prices by the end of the decade.

The increasing demand for grid connections and electricity to power data centers is set to propel natural gas demand, challenging the Biden Administration’s plans for a greener grid. Despite preferences for solar and wind energy, the necessity for fast deployment of data centers is driving up the need for natural gas alongside renewable sources.

Projections suggest that electricity demand from data centers could quadruple by 2030, requiring an additional 8.5 billion cubic feet per day of natural gas to meet consumption. Consequently, U.S. benchmark natural gas prices could double to around $4 per million British thermal units (MMBtu) by the end of the decade.

Leading natural gas producers and pipeline companies are poised to benefit from this surge in demand. Companies like EQT Corporation, Chesapeake Energy, and pipeline giants such as Energy Transfer, Williams Companies, and Kinder Morgan are expected to capitalize on rising natural gas prices and consumption.

Despite the current market glut leading to output curtailments, producers anticipate boosting production later in the year to meet rising domestic power demand and liquefied natural gas (LNG) exports. Kinder Morgan, for instance, remains optimistic about the future of its natural gas transportation business, anticipating substantial growth driven by increased LNG exports and power demand from AI operations, cryptocurrency mining, and data centers.

Natural gas, already a significant contributor to U.S. electricity generation, is expected to play a crucial role in meeting the backup power needs of new renewable capacity installations. As data center electricity consumption continues to rise, utilities and regulators are revising their forecasts for peak power demand, further emphasizing the importance of natural gas in the energy landscape.