(The opinions expressed here are those of the author, a

columnist for Reuters.)

*

Share of data centres in U.S. power market to more than

double

by 2030

*

Natural gas to account for over half of incremental power

supply

*

U.S. natural gas production set to peak in early 2030s

By Ron Bousso

LONDON, April 29 - The race for AI supremacy could have

an unlikely loser: U.S. liquefied natural gas exporters.

While America boasts some of the world's largest gas

reserves, a sharp increase in electricity demand over the coming

years, driven by the rise of artificial intelligence, could

heavily strain the country's creaky power systems and

infrastructure, pushing natural gas prices higher and

potentially undermining the economics of LNG plants.

The world's top technology companies including Meta, Google,

Amazon and Microsoft ( MSFT ) are pouring tens of billions of dollars

into data centres to train and deploy AI models, which consume

massive amounts of energy.

Data centres' share in the U.S. power market is set to grow

from 6% today to 13% by 2030, accounting for nearly half of

electricity demand growth in that period, according to a recent

report by the International Energy Agency.

Electricity demand from U.S. data centres is forecast to

rise by around 240 terawatt-hours - roughly the size of total

global data centre electricity demand in 2022 - between 2024 and

2030, according to the IEA. Natural gas is expected to supply

over 130 TWh of that incremental demand.

Data centres have stringent "five-nines" uptime standards,

meaning they are required to run 99.999% of the time. This makes

energy reliability critical.

So even though many tech firms are investing in low-carbon

sources of electricity generation, such as renewables and

nuclear, to help power their new data centres, they are also

banking on natural gas to play a key role by offering stable

power. Gas is already the largest source of electricity for data

centres, meeting 40% of these needs.

Gas power plants are now often being built in close

proximity to data centres. For example, the Abilene-Texas-based

data centre at the heart of the $500 billion Stargate project

backed by OpenAI, SoftBank and Oracle will be powered by

renewables as well as several new gas power plants being

developed nearby, according to East Daley Analytics' Zach

Krause.

KEEPING PACE

U.S. natural gas production has surged over the past 15

years thanks to the country's huge onshore shale reservoirs,

turning the United States into the world's top exporter of LNG.

Production of the super-chilled fuel is forecast to more

than double from 12 billion cubic feet per day at the end of

2024 to 27 bcf/d in 2028, according to LSEG data. And more LNG

facilities are planned to come on stream later this decade,

which could bring production up to 40 bcf/d.

But U.S. gas production is forecast to peak in the early

2030s, according to the U.S. Energy Information Administration.

The meteoric LNG growth that has benefited from cheap domestic

prices may struggle to keep up in the face of the growing demand

for natural gas from data centres and other industrial and

residential sources which would put upward pressure on U.S. gas

prices.

Indeed, in the EIA's recent long-term outlook, it forecast

benchmark Henry Hub gas prices to nearly double from $2.94 per

million British thermal units in 2025 to $5.49 per MMbtu in

2035.

COMPETING INTERESTS

High demand for gas turbines and other infrastructure, which

has already created a significant backlog, will also likely lead

to higher power prices. NextEra Energy ( NEE/PN ) CEO John Ketchum said

recently that the cost of building a gas-fired facility has

tripled since 2022 to $2,400 per kilowatt.

And as demand for electricity and gas grows in the U.S., so

will pressure on the country's energy infrastructure such as

transmission and distribution systems and gas pipelines.

The U.S. has not invested enough in either, as evidenced by

the severe disruptions aging power infrastructure has caused in

recent years, including a wave of blackouts in Texas and Florida

in 2021 and 2024, respectively, both due to severe storms.

Most major transmission networks are already at capacity,

and the large additional demand would require significant

infrastructure improvements, Krause said.

That, in turn, could lead to more outages and greater

volatility in gas prices.

If all these forces result in a sharp rise in domestic gas

prices, U.S. LNG plants - which typically use gas to power their

energy-intensive cooling process - could see their profit

margins and competitiveness decline sharply.

In a scenario of rising domestic gas and power prices, U.S.

administrations would be faced with a tough choice: prioritise

energy-hungry U.S. data centres or gas exporters? Given the

likely importance of AI to U.S. economic and geopolitical

interests moving forward, LNG exporters may well find themselves

losing out.

** The opinions expressed here are those of the author, a

columnist for Reuters. **

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