The U.S. natural gas demand story has been geared to LNG growth, but there’s another story that could become even bigger: fueling a proliferation of computer data centers.
The power-intensive artificial intelligence (AI) computer warehouses are to be fueled mostly by abundant and reliable domestic natural gas. It's the next big thing, according to Williams CEO Alan Armstrong.
Speaking at CERAWeek by S&P Global, Armstrong said Wednesday “electric load from data centers is going to grow threefold by 2030.”
Since the 2020s began, domestic electricity demand has been climbing three times faster every year than in previous decades, pulled by an increase in electric vehicle use, but also the buildout of large-load data centers across the country, Armstrong said.
Natural gas markets need to prepare now, he said. The Tulsa-based operator moves gas supplies across the Lower 48 and from the deepwater Gulf of Mexico. It now is projecting that the power loads from the large computer infrastructure data centers will climb to 30 GW by 2030.
The power load forecast is even higher, according to commercial property consultancy Newmark. In a forecast issued earlier this year, the consultancy said U.S. data center power consumption could reach 35 GW by the end of the decade, almost double the 2022 level.
How does that impact the natural gas market?
“We’ve certainly seen, just in the last year, some new fundamentals emerging,” Williams’ Chad Zamarin, executive vice president of Corporate Strategic Development, said. In an interview with NGI, he said, “I don't think any of us appreciated the true scale of demand that's required to supply those resources and that's real…We're seeing it across our footprint…”
Utilities ‘More Active’
Underpinned by the massive Transcontinental Gas Pipe Line Co. system, aka Transco, Williams has “certainly seen the utilities get more active,” Zamarin said. Utilities are “recognizing that they both need additional natural gas pipeline and storage capacity to support electrification – and the volatility that comes with needing to support renewables” as an intermittent load.
Some of Williams’ largest utility customers are seeing the load growth projections. For example, Georgia Power, a Southern Company utility, has said its current load growth projections “are 17 times higher” than what was forecast in 2022.
Customer Duke Energy Corp. has reported that together, North Carolina and South Carolina are “experiencing eight times the load growth they projected just two years ago. Said another way, for every power plant built over the last 60 years, Duke would need to build half of that again in the next decade to meet expected demand.”
Dominion Energy Inc., another customer, is forecasting power load needs from new data centers in Virginia will grow over the next decade by 2.5 times. Virginia is “home to more than 35% of all hyperscale data centers worldwide, including facilities owned by Amazon, Alphabet and Microsoft.”
Data centers typically operate 24-7, which leads to higher heating and cooling requirements. By expanding infrastructure, particularly along the Transco route, customers would be able to meet peak demand and grow.
Next-Gen Gas Evolution
In addition, the team is “pushing really hard on the evolution of the natural gas solution, in those next-generation technologies,” or as the company refers to it, next-gen gas.
Next-gen gas refers to the “end-to-end emissions reduction and certification on the natural gas value chain,” Zamarin said.
Beyond the pipeline system, the company is advancing a bevy of projects as it eyes increasing gas demand down the road. Over the past year Williams “did four fairly significant transactions” tied to building out gas storage. Late last year the company paid Hartree Partners LP nearly $2 billion for a portfolio of Gulf Coast storage assets.
The deal, following a year of notable transactions, crowned Williams as the largest gas storage operator on the Gulf Coast, Zamarin noted.
Storage is needed for coming data centers. And it also is a necessity for the LNG export trade on the Gulf Coast. Gas storage originally was built for local distribution companies to use for seasonal demand.
“Over the last 10 years, natural gas demand has grown by 50%. Pipeline capacity has grown by 25%. Storage capacity has not grown at all.” However, demand is clearly on an upward trajectory, Zamarin said.
“We are seeing the demands to do more with our infrastructure” with data centers underway and liquefied natural gas capacity growing. “One of the fascinating things we see is, the more you increase wind and solar…you may not increase average gas demand, but peak gas demand will increase dramatically…
“We're modeling it to triple by 2040…The peaks and the valleys of demand are going to become more extreme. So we need to make sure the infrastructure is designed for that.”
Westward, Ho!
Gas demand across the West also continues to grow, overcoming attempts by some municipalities to ban its use. California is one of the top growth areas in the country for natural gas, American Gas Association CEO Karen Harbert told NGI.
Williams is anticipating that western trend, moving in late 2022 to bolt on MountainWest Pipelines Holding Co., a Rockies system that includes a large storage system. The deal, said Zamarin, provided “a bridge between markets, and the West needs it.”
The company’s “western strategy” recognizes that the Pacific Northwest, including California, “may not talk about how much they love natural gas, but they're going to need it to balance the renewable intermittency that we see kind of west of the Rockies, where there's no native production. That's important.”
Likewise, in the rapidly growing Dallas-Fort Worth metroplex, NorTex Midstream Partners LP was bolted on in 2022 as a lever for the region and for Gulf Coast markets.
“You've got declining market supply with increasing power demand in the Dallas-Fort Worth area,” Zamarin said. “This is a theme that we've been focused on, the pretty simple, fundamental gas demand growth and lagging pipeline capacity…Our goal has been to couple storage with our pipeline network, and we’re really focused on those key fundamentals and the need to balance renewables.”
In Texas on “any given day,” he said, “the wind is blowing at different levels and natural gas is picking up and slowing down to balance the market. Storage will be important for that. And then the Gulf Coast has obviously the LNG demand.”
No Stopping LEG, Either
To that end, Williams is working to expand its Louisiana infrastructure to carry more Haynesville Shale supply. However, a legal hitch with Energy Transfer LP has stalled development in the state, where the Louisiana Energy Gateway (LEG) gathering system would add 1.8 Bcf/d of capacity.
LEG “will absolutely get built,” Zamarin said. “We're making it clear that even if we can't rely on the courts to resolve issues, we are permitting an alternative path that avoids the crossings that are being disputed, addressing, we ultimately think, that the courts – and if needed legislation – will address this issue.”
What’s worrisome is having gas industry peers duking it out about infrastructure that is necessary.
“It’s not good for our work as an industry, when we’re talking about how important it is to build infrastructure, to make it harder on ourselves,” Zamarin said. “It doesn't make sense.” As far as the capacity to be built, “there's plenty…We do think that gets resolved.”
Meanwhile, it’s not like Williams needs to be too concerned about moving gas. Take the offshore, for example.
“We’ve gotten so big as a country in the gas basins, and in the Permian, so that the volatility in the offshore Gulf of Mexico is not as noticeable,” Zamarin said. “But I will tell you that…we're seeing more activity in the Gulf than we've seen in the last 20 years…We have a bunch of projects that come online” late this year and into 2025 that could “double our earnings in the Gulf of Mexico… That’s a big growth area for us.
“Producers recognize the benefit of developing close to existing infrastructure,” where original developments have declined. “So, there's available capacity. These are very efficient tie-ins to the existing infrastructure.”
