AI will require over 17 bfc/d of natural gas-fired power globally, page-2

While West focuses on the energy needed to operate AI models, Mark Mills has tried to quantify the energy required to build the computer infrastructure. In his book, The Cloud Revolution, Mills outlines the massive energy needs of modern computing infrastructure. Although he notes that companies often do not fully disclose the energy needed to build modern data centers to power AI models, we have attempted to quantify the energy required to build out 150 GW of AI data center demand by 2030.

Manufacturing high-performance semiconductors is energy-intensive. Although our numbers are preliminary, we believe manufacturing a modern data center consumes at least 8,500 MWh per MW of capacity. Reaching 150 GW of newly installed capacity by 2030 will consume an additional 2,500 TWH of electricity, or 430 TWH per year – nearly 50% as much energy as required to power the centers.

Although most semiconductor fabs are located outside the United States, a strong push exists to relocate manufacturing domestically. Regardless of where the chip manufacturing is situated, it is clear that building out 150 GW of data centers will require a tremendous amount of energy, further tightening global energy markets.

In our view, US natural gas demand is set to grow at the fastest rate in history between now and 2030.

At the same time, dry gas production appears to have peaked. While analysts are hopeful that a rebound is forthcoming, we are not as optimistic. The shale gas revolution resulted in a dramatic increase in supply, but as we have argued, immense is not the same as infinite. More than half of reserve estimates have now been produced in every major shale basin, an event that has corresponded historically with falling production.

If our models are correct, and we believe they are, the most significant gas demand increase in history will occur just as production begins to falter.

US natural gas inventories are currently 2.7 tcf, nearly 600 bcf above seasonal averages. Although high by historical standards, our models suggest inventories will normalize as we progress through 2024 and into 2025. Assuming average weather, we expect inventories to work off all their surpluses early next year. By next fall, inventories could stand at record deficits.

Although weather always remains a wild card in natural gas markets, new demand from LNG and AI combined with slowing shale production will likely overwhelm any period of mild weather.