Chilling in the USA: LNG Securing Strong Long-Term Position in C&I Energy Transition
Key Highlights
- Natural gas continues to dominate U.S. energy output, with production nearing 115 billion cubic feet per day, driven by shale plays in the Permian Basin and Haynesville.
- U.S. LNG export capacity is expanding, but domestic supply may outpace demand, potentially lowering prices and increasing availability for internal use.
- Data center demand and industrial electrification are significantly increasing natural gas consumption, shaping future energy infrastructure decisions.
Truth is, natural gas is still king of American energy output and consumption, despite the undeniable and impressive market success and growth of renewable energy. In fact, natural gas is so secure in its position it’s chilling out more than ever.
Let’s go back briefly: The role of liquified natural gas in the 21st century energy transition was considered a domestic issue, at best, a decade ago. It was marginal and within boundaries. The ambition was there but the goal not in reach yet.
Yes, the shale revolution was in full swing in the Bakken, Marcellus and Utica basin plays. The U.S. was producing more natural gas than ever and only beginning to see the long-term value in liquifying that commodity at gulf terminals and eventually becoming the world’s biggest exporter of LNG.
Most renewable energy advocates and industry forecasters wondered if global LNG ambition was a short-term play, as surely reserves and demand would dissipate over time.
Stop right there, because apparently there’s no stopping LNG and gas supply as it stands today. The rise of artificial intelligence, digital infrastructure, manufacturing reshoring and industrial electrification has changed the dynamic for decades, maybe even until that one-time net-zero benchmark of 2050..
Enter recent data and research, which is indicating that U.S. natural gas capacity may only be growing and even outpacing LNG export demand. The most recent report by Enverus Intelligence Research shows that new gas supply arriving from the expanding Permian Basin and Haynesville Shale plays is changing the market dynamic significantly.
Enverus Intelligence Research (EIR) estimates that accelerating supply additions throughout the U.S. will top LNG demand by close to 1.3 billion cubic feet per day at the end of 2027. The U.S. domestic market, then, would absorb that increased supply imbalance and possibly drive down prices 25 cents to an average $3.25 per million British thermal units (BTUs) at the Henry Hub market price, according to EIR.
No doubt that U.S. demand will take advantage of that added supply. Research at BloombergNEF anticipates that American data center demand will consume an additional 15 billion cubic feet per day of natural gas for electricity generation in the coming years ending in 2035.
Such volumes would push U.S. data center consumption even beyond that of most countries around the world, BloombergNEF has noted. The daily forecast is more than double Bloomberg’s prediction of 6.9 billion cubic feet per day of only 10 months ago.
These staggering volumes may subside eventually as lower cost resources become harder to get in the coming decades, but reckoning day seems like a long time from now. New data from the federal Energy Information Administration (EIA) indicates that U.S. dry natural gas production is nearing 115 billion cubic feet per day, including about 20 million cubic feet out of the Permian Basin alone. The EIA estimated dry gas production hit an all-time high of 113 billion cubic feet per day in July.
A quick note on LNG: Dry gas production is transported by pipelines to coastal terminals where it is chilled to minus 260 degrees Fahrenheit to liquify it and make stable for shipping.
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Data center developers now base key siting decisions not solely on fiber optic location, but increasingly access to power. This power could be grid interconnected or behind-the-meter as speed-to-power considerations grow.
Utilities are also embracing natural gas in historic ways, using it to power more than 40% of U.S. electricity generation, according to the EIA.
The rise of solar capacity and battery storage may cut into the scale of natural gas over the long term, but some researchers including McKinsey & Co. are forecasting that it will still account for at least 40% of utility-scale electricity in 2040.
LNG export providers such as Cheniere Energy, Sempra and Glenfarne are banking on global demand keeping pace, as well. Cheniere recently cut a long-term LNG supply deal with Petrobras of Brazil, while South Korea is reportedly investing up to $50 billion to access U.S. LNG capacity for its data center and AI growth plans.
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About the Author
Rod Walton, EnergyTech Managing EditorRod Walton, EnergyTech Managing Editor
Managing Editor
For EnergyTech editorial inquiries, please contact Managing Editor Rod Walton at [email protected].
Rod Walton has spent 17 years covering the energy industry as a newspaper and trade journalist. He formerly was energy writer and business editor at the Tulsa World. Later, he spent six years covering the electricity power sector for Pennwell and Clarion Events. He joined Endeavor and EnergyTech in November 2021.
Walton earned his Bachelors degree in journalism from the University of Oklahoma. His career stops include the Moore American, Bartlesville Examiner-Enterprise, Wagoner Tribune and Tulsa World.
EnergyTech is focused on the mission critical and large-scale energy users and their sustainability and resiliency goals. These include the commercial and industrial sectors, as well as the military, universities, data centers and microgrids. The C&I sectors together account for close to 30 percent of greenhouse gas emissions in the U.S.
He was named Managing Editor for Microgrid Knowledge and EnergyTech starting July 1, 2023
Many large-scale energy users such as Fortune 500 companies, and mission-critical users such as military bases, universities, healthcare facilities, public safety and data centers, shifting their energy priorities to reach net-zero carbon goals within the coming decades. These include plans for renewable energy power purchase agreements, but also on-site resiliency projects such as microgrids, combined heat and power, rooftop solar, energy storage, digitalization and building efficiency upgrades.