AI Boom Will Fuel Surge in Natural Gas Demand, Report Predicts

The rapid growth of artificial intelligence (AI) data centers is expected to significantly boost natural gas demand in the second half of the decade, according to a report by investment bank Tudor Pickering Holt & Co.

The report estimates that up to 8.5 billion cubic feet per day of additional natural gas could be required to meet the rising power demand from AI.

The surge in power usage from AI has raised concerns that the U.S. electrical systems are not expanding fast enough to keep up with the rapidly growing needs of technologies like Generative AI. This has prompted some data center businesses to bypass utilities and strike deals directly with power producers or build their own supply.

Why this matters: The AI boom's impact on natural gas demand highlights the growing interdependence between the technology and energy sectors. As AI continues to progress and become more widely adopted, it will have significant implications for energy consumption and infrastructure planning.

The report estimates that current power demand from data centers is 11 gigawatts (GW), which is expected to grow to 42 GW by 2030, requiring around 2.7 billion cubic feet per day of incremental natural gas by that time. Tudor Pickering Holt & Co. analysts expect natural gas prices to average $4 per million British thermal units during the second half of the decade.

Pipeline operators like Kinder Morgan, Williams, and Energy Transfer are well-positioned to benefit from the growing gas demand, according to the report. Gas producers such as EQT and Chesapeake Energy would also see gains from the increased demand driven by the AI boom.

The findings emphasize the need for collaboration between the technology and energy industries to ensure that the necessary infrastructure is in place to support the growth of AI and other power-intensive technologies. As the AI revolution continues to unfold, its impact on energy demand and the broader economy will be closely watched by investors, policymakers, and industry leaders alike.

Key Takeaways

• AI data centres will significantly boost natural gas demand by 8.5 bcf/day by 2030.
• Current data center power demand of 11 GW is expected to grow to 42 GW by 2030.
• Pipeline operators and gas producers poised to benefit from increased natural gas demand.
• Collaboration between tech and energy sectors needed to support AI's growing power needs.
• AI's impact on energy demand and the economy to be closely watched by stakeholders.