Data centres vs US LNG
DEEP DIVE: Could an AI-fuelled boom in gas demand threaten the economics of US LNG exports?
Can the United States produce enough cheap natural gas to service both the coming new wave of liquefied natural gas (LNG) export projects and an anticipated explosion in data centre power demand?
With US shale producers throttling production due to a lack of demand and flatlining prices, this might seem like an odd question. To be clear, there is no credible risk of physical gas shortages arising from either LNG exports or power generation this side of 2030.
But if bullish forecasts of an AI-fuelled power demand surge prove accurate, there’s every chance of wholesale gas prices on Henry Hub creeping materially higher in the next few quarters. And as readers of Energy Flux will know all too well, the ongoing global buildout of new LNG supply projects is depressing futures prices in major LNG-importing regions.
US LNG margins have fallen sharply from 2022 highs as Europe recovered from the loss of Russian gas, but ultra-cheap shale gas keeps cargoes in the money. The American gas industry is getting excited about a proliferation of data centres driving demand for gas-fired electricity. Could this inflate the cost of feed gas to the point that US LNG exports become uneconomic in structurally oversupplied global markets?
Let’s find out!