A new report from Moody’s Ratings offers an answer to a common question among natural gas producers: How much will the incremental demand from data centers and liquefied natural gas exports impact prices?

“We expect that natural gas prices will rebound and surpass $3.00/MMBtu in 2025, assuming normal winter temperatures and ongoing producer focus on capital discipline,” Moody’s forecasts. “As new power demand from tech companies remains pressing, and additional liquefied natural gas export capacity comes on line in the second half of 2025 and in 2026, natural gas prices will firm up and trade above $3/MMbtu. Such levels will support adequate investment and returns on capital, while boosting profitability and free cash flow for cost-efficient large gas producers.”

Data centers prefer to secure power from renewable sources, Moody’s notes. However, demand is increasing too quickly for electric utilities to keep pace without the aid of more traditional sources, meaning that most data centers rely on nonrenewable power sources, such as natural gas and coal. “Extending the life of existing power plants, or building new natural-gas-fired generation, is the fastest, most cost-effective way to satisfy growing data center power needs,” Moody’s says.

“While we expect that carbon-free resources, including nuclear, wind, and solar power, coupled with battery storage will ultimately meet most of the new energy demand from U.S.-based data centers, the renewable resources are intermittent,” the agency adds. “Even if renewable energy serves all of the forecast new data center power demand, we would still estimate that data centers will need at least 20,000 megawatts of new natural gas-fired base load capacity in the next four-five years to balance that intermittent supply, with at least half of this demand in the United States.”

According to the report, “Race to Power AI Will Boost U.S. Producers of Natural Gas and Coal, at Chemicals’ Expense,” the additional demand will “translate to 2 billion-4 billion cubic feet per day in incremental gas demand over the next four-five years, reversing a long stagnation in domestic demand for natural gas.”

The long-term demand impact can be unpredictable, the report acknowledges. “AI-driven applications are rapidly evolving and technology improvements continue to improve efficiencies, making long-term estimates about data center energy demand uncertain,” Moody’s explains. “Consequently, utilities may choose to rely more on cost-efficient gas-fired generation than we expect in our scenarios, at least in the near term. Such actions will heighten the near-term volatility in natural gas demand and prices as producers adjust to rapidly rising domestic and international demand.”

LNG’s Role

Whether data centers deliver a moderate bump or a mighty surge in demand, gas producers will benefit from new LNG export capacity, Moody’s suggests. Noting that most of the capacity scheduled to come on line in 2025 and 2026 is already under contract, the agency says it has great visibility into international demand for U.S. gas.

“LNG exports will likely require over 15 Bcf/d of incremental gas production through 2030, with almost 7 Bcf/d of capacity likely to begin production in 2025-26,” Moody’s projects.

According to the firm, producers will need a sustained improvement in natural gas prices to meet demand from data centers and export terminals. “We estimate that U.S. producers require average Henry Hub natural gas prices in the range of $2.50-$3.50/MMBtu—our medium-term price range—to support profitable reinvestment and replacement of produced reserves,” the firm clarifies. “But U.S. gas prices averaged only $2.11/MMBtu from January to September 2024—well below the $2.50-$2.75/MMBtu long-term full-cycle breakeven cost for the nine largest rated gas producers.”

As long as prices reach sufficient levels, the United States has ample supply to meet the coming demand, Moody’s assesses. The firm says most of the incremental supply will come from the Haynesville Shale, Permian Basin and Appalachia.

“Appalachian producers have the lowest costs and largest reserves, but have takeaway capacity constraints,” Moody’s observes. “Permian gas supplies will depend on ongoing oil production growth, which could add roughly 1 Bcf/d of associated gas annually to overall supply, regardless of gas prices. Despite their higher cost structures, Haynesville and East Texas will likely become the largest swing-producing areas, being closer to LNG export facilities along the Gulf Coast.”

Getting gas to emerging data center hubs and LNG export terminals likely will require new midstream infrastructure, Moody’s says. “U.S. gas producers have the capacity to boost production by 2 Bcf/d-3 Bcf/d quickly with little midstream investment in 2025, but additional future growth will require more infrastructure,” the firm says. “Unless the additional data center demand is located in areas of gas production, the industry will need substantial new pipeline infrastructure and storage capacity.”

Midstream Movement

In a separate report, “LNG and AI Offer Growth Tailwinds, Subject to Regulatory and Social Hurdles,” Moody’s Ratings dives into growing demand’s implications for midstream companies.

“On top of LNG demand, the likely rapid North American construction of data centers—which are voracious consumers of energy—and the electrification that they need promise a substantial boost in both natural gas demand and the infrastructure that serves it. Estimates vary for how much and when natural gas demand will pick up from LNG liquefaction facilities and for AI-driven data centers. But medium-term demand from both will likely dwarf that of other types of users,” the firm writes.

Moody’s reiterates its estimate that data centers alone will contribute 2 Bcf/d-4 Bcf/d in incremental demand by 2030. If renewable energy grows more slowly than expected, the agency says the demand increase may be higher.

Even if renewable capacity expands quickly, data centers will create a lasting tailwind for natural gas. “Data centers and AI will likely still depend on natural gas for power reliability beyond 2030, and will therefore keep contributing to growth in midstream infrastructure,” Moody’s predicts.

“Large midstream companies have begun to note these expanding opportunities,” Moody’s observes. “Kinder Morgan estimates that AI and data centers will add some 3 Bcf/d-6 Bcf/d of incremental gas demand by 2030, and that demand will possibly even exceed 10 Bcf/d. Even with 3 Bcf/d of additional demand, midstream companies will seek to build several new laterals connecting to power plants supplying data center hubs in places such as Dallas and northern Virginia.”

Building pipelines can be a challenge given regulatory requirements, Moody’s notes. The agency points out that the Mountain Valley Pipeline cost $7.8 billion to complete, more than twice its original estimate.

“Emission regulations will likely tighten over time, and approval processes will likely become costlier, longer and potentially stricter for midstream projects,” Moody’s suggests. “In certain regions, environmental and other social-license factors may continue to impede new development. Besides federal oversight, state and local opposition to energy infrastructure projects have been increasing for years, especially in nonproducing states. Such opposition invites litigation or extends regulatory reviews, which can delay projects and even make their costs uneconomical for their sponsors.”

Although these delays tend to last longer in nonproducing states, even projects in industry-friendly states face lawsuits. However, Moody’s says that “intrastate infrastructure projects in major energy-producing states such as Texas and Louisiana should still get approved.”

For more details on data center and LNG exports’ impact on gas demand, Moody’s subscribers can download the full reports on the upstream sector or the midstream sector. The reports highlight large companies that may be affected by the trends they discuss, explore growing energy demand’s implications for coal-fired power plants and chemical manufacturers, and highlight some of the regulatory headwinds for LNG projects.