Just a few years have passed since analysts were predicting demand for U.S. natural gas would soon peak and begin a long slide as climate goals spurred America’s energy transition. But surging domestic demand for electric power – in large part due to the AI-driven rush to build new data centers – and a significant ramp-up of LNG export capacity could turn 2025 into another record year for natural gas, barring disruptions from disastrous trade policies.
It wasn’t so long ago that the prospects for the U.S. natural gas industry seemed so dim that it became fashionable for local distribution companies to distance themselves from their fossil fuel roots and start rebranding themselves as “energy infrastructure companies.”
Even if then-proliferating bans on new hookups and forced electrification policies prevented companies from pushing the geologic fuel to their customers, they knew their transmission and distribution systems would be key to delivering new-era energy molecules, including renewable natural gas and hydrogen.
Hold the phone: Lo and behold, natural gas seems to be America’s darling again, if not with climate advocates, then certainly with the businesses and industries that are counting on the nation’s abundant supplies of the fuel to fill new energy needs and continue to power the U.S. economy.
Coming off a record year for U.S. natural gas consumption in 2024, the upward trajectory has continued into 2025, with the U.S. Energy Information Agency (EIA) forecasting in mid-March that consumption will hit a new record of 92.0 billion cubic feet per day (bcf/d) this year.
Of course, that estimate likely didn’t foresee the impact of ongoing trade shenanigans on the part of President Donald Trump, which as of mid-April had financial markets reeling, staunch allies like Canada wondering what happened to their reliable old friend and recession risks soaring.
Long term, however, two powerful trends buoy the rising fortunes of the U.S. natural gas industry: America’s appetite for electric power is suddenly growing again for the first time in decades, and global demand for U.S. LNG continues to surge just as new infrastructure needed to serve the export market is coming online.
Those trends, combined with one of the coldest winters in several years, had pushed benchmark prices of natural gas over the $4/MMBtu mark by late March, up from under $2 last year, propelling analysts to predict expanded investment in gas production and infrastructure to serve domestic and export markets.
Structural growth happening here
The U.S. power sector in January set a new monthly record for gas demand for a winter month, and the same month, industrial demand hit the highest level on record going back to 2005, according to Richard Meyer, Vice President, Energy Markets, Analysis and Standards at the American Gas Association.
“The industrial number is very interesting because that’s driven by not just heating demand, but there are economic and structural factors,” Meyer said. “The fact that it’s at an all-time high in what was a very cold January but not the coldest we have on record is very suggestive of some structural growth happening here.”
Meyer has no doubt that some of that structural growth is thanks to investments in U.S. manufacturing spurred by incentives in the Biden-era CHIPS and Science Act and the Inflation Reduction Act (IRA), which have goosed demand for natural gas both for power generation and for direct use in production.
In addition, the increase in nearshoring – shortening global supply chains by moving manufacturing and assembly operations to Mexico from far-flung locations to reduce exposure to geopolitical risks and vulnerabilities laid bare during the pandemic – is also boosting Mexico’s demand for U.S. natural gas.
U.S. natural gas exports to Mexico are expected to grow nearly 40% from 6.5 bcf/day to 9 bcf/day by decade’s end, with nearshoring accounting for about one-third of the growth, according to Patrick Rau, Senior Vice President, Research and Analysis for industry publication Natural Gas Intelligence (NGI).
Riding AI and the data center boom
The game-changer for U.S. natural gas in the near future, however, is America’s voracious appetite for electric power, with consumption expected to rise 50% by 2050 after remaining essentially flat for much of the past 25 years. Experts say U.S. generating capacity will have to double by 2035 to meet the need.
“The game-changer for U.S. natural gas in the near future, however, is America’s voracious appetite for electric power, with consumption expected to rise 50% by 2050 after remaining essentially flat for much of the past 25 years. Experts say U.S. generating capacity will have to double by 2035 to meet the need.”
In addition to the aforementioned structural changes in demand, some of that growth will result from electrification policies – a key strategy advocated by climate advocates to replace the direct use of natural gas in various applications with electricity generated from lower-emitting energy sources such as renewables.
But the major driver of growth in the short term – artificial intelligence or AI – wasn’t even on the radar just a few years ago. Today, demand for power from America’s tech giants is exploding as they build out new data centers to handle the huge computing requirements of AI-driven programs.
Some experts project a 15% annual growth rate in electricity consumption by data centers through 2030 and estimate that data centers could account for fully 5% of total global consumption of electricity by the end of this decade.
A Bank of America Securities report in early March projected capital expenditures for “hyperscalers” – the massive data centers being built by tech giants like Microsoft, Google parent Alphabet, Nvidia, Meta, Amazon and Tesla to train AI models – will increase 34% year-over-year to $257 billion in 2025.
There’s little agreement on how much data center electricity requirements could add to gas demand, with estimates from 1 bcf/day by the end of 2030 to 18 bcf/day. NGI’s Rau believes the median is around 4.5 bcf/day, adding that it could be “a bit bullish depending on how a number of different factors play out.”
Unknowns include how quickly AI developers can follow the lead of DeepSeek in finding less energy-intensive ways to train the models used by generative AI tools like ChatGPT and how much supply chain issues, such as turbine shortages, will limit the natural gas industry’s ability to pounce on opportunities.
Case in point: NRG Energy, GE Vernova and Kiewit announced plans in late February to build more than 5 gigawatts of natural gas combined-cycle plants to supply data centers, with the new capacity phasing in from 2029 through 2032. “That right there tells you there is a long lead time,” Rau said.
Still, natural gas is in an enviable position to cash in on the data center boom. All of the big tech players have net-zero climate goals and would prefer to not use natural gas to run their data centers, but neither intermittent renewables nor nuclear, which faces even longer wait times, can meet all their needs.
“With AI, the idea is that these new data centers are going to need to run 24/7, so they’re going to need to be able to run baseload, they’re going to need to be able to run all the time at full capacity,” Rau said. “Natural gas really seems to check all of the proverbial boxes of what folks would want and need.”
The ability to meet those kinds of specific power requirements – not only for data centers but other mission-critical applications – is one reason natural gas used in power generation was up 3.3% in 2024 and still accounts for 43% of the overall power generation energy mix in the U.S., according to the EIA.
While the ultimate future impact remains murky, one thing is clear: The adoption of AI-driven technologies is growing at an exponential rate. ChatGPT has gone from zero when it was introduced in November 2022 to 400 million weekly active users as of February, according to OpenAI.
And it’s still early days. Emerging “agentic AI” models promise to deliver true automation to all manner of business and industrial processes from renegotiating contracts to smart robotics able to think and make decisions autonomously. Even assuming more energy-efficient models, AI will require a lot of juice.
Opening the LNG spigot
Adding to the prospects for another record year for natural gas has been the rapid buildout of U.S. LNG export infrastructure and – with the shifting policy landscape in Washington, D.C. – an unabashedly favourable view of natural gas and gas infrastructure and fewer regulatory hurdles to delay projects.
New LNG export facilities scheduled to come online this year are expected to increase demand for feed gas by about 3 bcf/d, which would be close to a 25% increase over 2024 volumes, according to NGI’s Rau. Feed gas demand as of mid-March was averaging more than 15 bcf/d, with flows on March 21 approaching 17 bcf/d.
Those projects include Venture Global’s Plaquemines LNG 2 facility, slated to start shipping LNG in September, nine months after shipping its first cargo from Plaquemines 1. Venture Global in March announced plans to expand Plaquemines’ capacity from 27 million tons per annum (mtpa) to 45 mpta.
Cheniere Energy also was expected to start up the first phase of its Corpus Christi Stage 3 expansion facility in Texas this year, and Exxon reported in a regulatory filing earlier this year that its Golden Pass LNG project, a joint venture with Qatar Energy, remains on track to ship gas before the end of 2025.
With flexible destination clauses that allow them to send cargoes to where they will fetch the highest price, U.S. exporters are well positioned to capitalize on global LNG demand, said Rau, noting that demand remains strong as Europe continues to shun Russian gas and restock depleted inventories following a cold winter.
Red flags on trade cloud outlook
Robust domestic and export demand and low levels of natural gas in storage are combining to lift prices, and higher prices are sending the signal to natural gas producers that it’s time to increase production to bring supply and demand into line.
The EIA revised its 2025 price outlook in mid-March to an average $4.20 MMBtu for the year – up 11% from February – and estimated 2026 Henry Hub spot prices at an average “near $4.50 MMBtu,” according to the agency’s Short-Term Energy Outlook report issued March 11. That’s in line with Natural Gas Intelligence’s $4.45 MMbtu 2026 Henry Hub forward curve published the same day.
As early as February, those prices had already turned a flat to negative outlook on U.S. gas production in 2025 into expectations for a significant increase. NGI’s Rau began hearing in February about producers’ plans to add rigs and fracking crews and is projecting gas growth of more than 3% this year and closer to 5% in 2026.
“There’s a tremendous amount of gas that’s unlocked once you reach above (USD) $3.50 all the way up to $5.00,” said the AGA’s Meyer, referring to the range of Henry Hub futures prices. “It doesn’t surprise me that operators are responding. Now we’ll see how quickly it comes to market and at what volumes.”
Despite all indicators pointing toward another record year for natural gas, disruptions resulting from trade conflicts between the U.S. and its partners could derail forecasts, although at this writing in late March, it remained unclear whether angry exchanges of tariff threats would turn into a real trade war.
Rau downplayed the short-term impact on the U.S. natural gas market from trade friction with America’s largest trade partners. Canada supplies only 7% of U.S. gas needs, and Mexico gets 70% of its gas from the U.S., making it unlikely gas would be a pawn in a trade spat with America’s neighbor to the south.
His greater concern is a protracted trade war that triggers a global recession and shrinks demand for natural gas at home and abroad. As of mid-April, economists were putting the odds of a U.S. recession this year at 47% – about double February estimates – largely due to the erosion of business and consumer confidence resulting from President Trump’s erratic trade policies.
America’s natural gas industry – like its Canadian counterpart, no doubt – can only hope more moderate voices prevail and the world can avoid a global economy weighted down by tariffs and counter-tariffs. There will be no winners in that scenario.