American Oil and Gas Reporter - June 2024 - 25

Gas-Fired Generation
Necessary To Feed
Energy Appetite Of AI
As the tech industry invests heavily in data centers for the
growing artificial intelligence market, natural gas will be essential
to meet surging electricity demand.
According to Wells Fargo, electricity demand is forecast to
grow as much as 20% by 2030 thanks to the rise in AI. The oil
and gas industry is poised to meet that demand. Goldman Sachs
projects that natural gas will supply 60% of the power demand
growth from AI and data centers by 2030, with renewables providing
the remaining 40%.
How does AI development impact power demand?
As Fast Company reports, the growing AI market increasingly
is straining the grid at a pace beyond all predictions:
Last year, the five-year forecast from Grid
Strategies projected growth of 2.6%. That number
has since nearly doubled to 4.7%-and planners
expect peak demand to grow by 38 gigawatts.
That's equivalent to the amount needed to power
12.7 million homes, a bit more than the total
number of housing units in Texas.
Perhaps even more concerning, experts
say that's likely an underestimate of what the
actual need will be, saying they expect the
next forecast (in December of this year) to
show an even higher nationwide growth rate.
" The U.S. electric grid is not prepared for
significant load growth, " Grid Strategies warned.
Wells Fargo anticipates that AI data centers alone will add
approximately 323 terawatt hours of U.S. electricity demand by
2030. It goes on to explain that these facilities' voracious
energy appetites will present unique power sector challenges.
" AI-focused data centers typically use more expensive servers
to train large language models compared to traditional enterprise
servers, " Wells Fargo reports. " The compute-intensive nature of
generative AI workloads compared to traditional information
technology workloads is presenting new challenges for overall
IT infrastructure, particularly in the form of higher levels of
energy consumption. "
Goldman Sachs forecasts that data centers will account for 8%
of total U.S. power demand by 2030, compared with 3% in 2022.
Fortunately, natural gas is a reliable solution. Because of its
reliability and cost advantages over other resources, a regional
abundance of natural gas has become an attractive selling point
for major companies looking to build data centers. This is
evident in the rise in data centers in natural-gas-rich states such
as Texas and Ohio.
" Lots of the demand looks like it's going to come on the East
Coast, " says Coterra Senior Vice President of Operations Blake
Sirgo. " That's very proximal to our assets. There's a lot of
existing pipes there that can easily get our gas to those markets.
And we are very interested. We are talking to a lot of these folks
directly trying to understand their business and their needs. "
In fact, Goldman Sachs estimates natural gas demand will
" Wells Fargo anticipates that AI data centers
alone will add approximately 323 terawatt
hours of U.S. electricity demand by 2030.
"
increase 3.3 billion cubic feet a day by 2030, and Tudor
Pickering Holt & Co. is on record saying that as much as an additional
8.5 Bcf/d may be necessary to match demand growth.
As Energy Capital Partners' Founder Doug Kimmelman recently
emphasized, expanding gas-fired generation will be critical to
these data centers. " Gas is the only cost-efficient energy generation
capable of providing the type of 24/7 reliable power required by
the big technology companies to power the AI boom, " he said.
Bob Hader, founder, chief investment officer and partner of
Proficio Capital Partners, made the same point in Forbes, " The
solution lies beneath the earth's surface, particularly in regions
like the Haynesville (Shale) spanning East Texas and Louisiana:
good old American natural gas, " he wrote. " According to
Thunder Said Energy, by 2030, power consumption for AI data
centers just in the United States could skyrocket to 400 terawatt-hours
annually, equivalent to approximately 1.3 trillion
cubic feet of gas per year or 3.6 billion cubic feet per day. To
contextualize, in 2023, the United States produced 104 Bcf/d of
natural gas. Meeting this escalating demand is likely to necessitate
increased drilling activity across the country. "
Similarly, Chevron Chief Executive Officer Mike Wirth told
CNBC that AI's rapid evolution made it tough to quantify the
implications. " But I think demand for natural gas is likely to be
higher than what people have been estimating up until now, " he
said. " You come back to natural gas as the most likely source of
that reliable baseload supply. "
Kinder Morgan Executive Chairman Richard Kinder concurred.
" The primary use of these data centers is big tech and I believe
they're beginning to recognize the role that natural gas and
nuclear must play, " he said.
The bottom line is that the growth in AI and its associated
data centers is spurring exciting investment opportunities. With
this tremendous growth opportunity also comes significant challenges,
most notably the incredible amount of energy necesssary
to power these facilities. Natural gas already is used in more
than 43% of U.S. electricity generation, which puts the U.S. oil
and gas industry ahead of the game in supporting critical technologies
with reliable, affordable energy.
❒
JEFF ESHELMAN is president
and chief executive officer of the Independent
Petroleum Association
of America and the founder/executive
vice president of Energy in
Depth. Along with more than two
decades at IPAA, he previously
worked at the Defense Logistics
Agency, the White House Office of
National Drug Control Policy and
three public affairs firms.
JUNE 2024 25
American Oil and Gas Reporter - June 2024

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