Natural Gas Boom to Heat Up in Texas
Texas is pumping natural gas out of the ground and exporting it at a record pace. It may only be the start of another energy boom for the Lone Star State because natural gas demand is growing both globally and at home.
Texas produced 34.1 billion cu ft daily of natural gas in March, newly released figures from the Texas Oil and Gas Association showed this week. The association forecast that by May, this will have grown to 34.4 billion cu ft daily. More than half of the March total was exported, at 12.5 billion cu ft daily, with the rest being consumed domestically.
More natural gas will need to be consumed domestically in the coming years, however, thanks to Big Tech's artificial intelligence ambitions. The topic is as hot as they come: AI data center operators are scrambling to find enough reliable electricity supply for their facilities. Wind and solar can't cut it, so the companies are going the nuclear path or, as it happens, the natural gas path.
A senior Amazon executive admitted earlier this year the technology sector will continue needing hydrocarbon energy for a while yet. Meta essentially admitted that talk about buying electricity from wind and solar operators is cheap; reliably powering data centers requires baseload generation that gas and nuclear can generate—and nuclear takes ages to build.
Despite the hype around small modular reactors, the world's nuclear energy currently comes from the large sort, and building a large-reactor nuclear facility takes a long time to construct. Gas-fired power plants, on the other hand, can be built rather quickly, which is going to drive natural gas demand further—and so will rising exports.A recent report from an outlet called the Center for Energy & Environmental Analysis found that the number of new natural gas pipelines being built in the United States was surging and that most of these—more than a 100—were export oriented, that is, geared towards feeding natgas to LNG plants. The number was 104 new pipelines, the CEEA said, which will bring online as much as 99 billion cu ft daily in transport capacity. With nine out of the ten biggest among these pipeline projects in Texas and Louisiana, most of the additional production will come from those two states.
Some are already warning that natural gas prices are going to surge at home due to the booming exports and the insatiable thirst of data centers. There is only so much gas to go around, and with demand surging, prices will follow, the bullish argument goes. But there is a bearish argument as well. Natural gas reserves are still very much abundant in Texas—and more associated gas is coming out of the shale oil wells.
Production of associated natural gas from the Permian, the Eagle Ford, and the Bakken oil wells has surged over the past decade, the EIA said earlier this year. In the Permian, the gas-to-oil ratio has risen steadily from 34% of total production in 2014 to 40% in 2024. The rise was a result of pressure within the reservoir declining over time, and as more oil is brought to the surface, which allows more natural gas to be released from the geologic formation. This is a prolonged process, and the current trend suggests it will continue just as demand for natural gas continues expanding. It might not be such good news for pure-play oil producers, but it's definitely good news for those in gas.
The export outlook is just as bright as the outlook for domestic demand. The biggest export markets for Texas-made LNG are Europe and Asia. In fact, the United States as a whole is the biggest LNG supplier to Europe. This is not about to change soon and the volumes of these exports are unlikely to be going down in any consistent way anytime soon. Europe may refuse to face facts, but it still very much needs natural gas to power its economies—and it doesn't want Russian gas. The only other source of comparable volumes of gas is the United States. Texas is set to continue breaking records.
By Irina Slav for Oilprice.com
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