As power demand continues to ramp up, more infrastructure will need to go in the ground, said East Daley Analytics' Nigel Gorbold at Hart Energy’s A&D Strategies and Opportunities conference in Dallas. (Source: Hart Energy)
DALLAS— The energy industry will continue playing catch up with increasing production by building infrastructure, but there’s a long way to go, said Nigel Gorbold of East Daley Analytics.
And as power demand continues to ramp up, more infrastructure will need to go in the ground.
Gorbold, the vice president of commercial and consulting, spoke on the increasing volatility in the U.S. energy sector at Hart Energy’s A&D Strategies and Opportunities conference on Oct. 23, providing a broad outlook at the opportunities and infrastructure needs going into the next decade.
In the natural gas sector, production in the Permian Basin is growing so rapidly that it could soon grow out of its most recent path of egress.
The Matterhorn Express Pipeline began large-scale commercial service at the beginning of October. A joint venture led by WhiteWater Midstream built the line to carry up to 2.5 Bcf/d of natural gas from the Permian to Katy, Texas.
Permian E&Ps had looked forward to the opening. Natural gas is, for now, a largely unwanted byproduct in a region associated with oil production and maturing shale basins with a growing ratio of natural gas to crude as they age.
The Permian surpassed 10 Bcf/d of natural gas production in 2018. The amount more than doubled by 2022 to 21 Bcf/d, according to the U.S. Energy Information Administration.
As egress capacity ran out, some producers had to decide between flaring, paying for the natural gas to be taken away when prices dip below zero, or cutting crude production.
The Matterhorn’s opening has provided some relief, but the extra capacity is rapidly filling up, Gorbold said.
“Matterhorn is ramping faster than … any pipe we've ever seen in recent history,” he said. East Daley’s monitoring shows the pipeline carried 1.5 Bcf/d within its first month of service. East Daley forecasts the line will reach capacity before the summer of 2025. The next major pipeline project, Blackcomb, is expected to come online in 2026.
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Even though the Matterhorn is providing some much-needed takeaway capacity, the price of natural gas remains well below profitability for Permian producers. The region’s gas price hit zero again at the end of October, thanks to a combination of pipeline maintenance and an oversupplied region at the end of the Matterhorn line.
“Just getting to Houston Ship channel doesn't necessarily guarantee you're clearing your molecules,” Gorbold said.
Some of the latest infrastructure projects will help to relieve a saturated market. Kinder Morgan (KMI) just announced the Trident Pipeline, which will move gas from the Houston area east to the Port Arthur area, where three LNG export facilities are under development.
Complicating the outlook is development of wind and solar power, and the predicted development of hundreds of energy-hungry data centers in the U.S.
East Daley has forecast an extra demand of 3.9 Bcf/d to 7.4 Bcf/d of natural gas from AI by 2030. The number is difficult to predict because power utilities will either build or rearrange a massive amount of infrastructure to bring the data centers online.
Gorbold said the reason for the large spread in demand expectations include increases “in tie-in queues, both on the natural gas pipeline connectivity [and] in grid power, as well as overall supply chain issues for getting server racks and AI chips, and even transformers stepping down grid power down to these data centers,” Gorbold said.
The U.S. gas market also faces an upcoming tide of demand from overseas LNG sales. The need to provide consistent baseload for intermittent wind and solar sources and meet growing demand for computer power also complicate the picture. Some regions, such as the Gulf Coast, have started to adjust. Other regions, such as Appalachia, are behind because of opposition to energy infrastructure development.
However, customers searching for energy are likely to expand markets across the U.S., according to East Daley.
“LNG demand and data center demand is really the tide that lifts all boats,” Gorbold said.
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