Natural Gas: Key to Meeting Surging U.S. Power Demand

Current Trends in U.S. Power Demand

U.S. power demand is projected to grow 38% over the next two decades, driven by new large loads and customer expectations for increased power needs. Clean energy integration and favorable weather conditions also influence demand trends, with companies like Southern Power expanding renewable capacity and reducing emissions.

"Over the next 2 decades, U.S. Power demand is expected to grow 38%. That is an annual rate 4 times higher than what we've seen over the last 2 decades. That 4 times increase is" --- (NEE, Investor Day, 2024/06/11)

"In 2023, nearly 1 third of our electricity came from clean energy sources. Additionally, Southern Power acquired 2 solar facilities expanding its renewable fleet to over 5,000 megawatts across the U. S.Strategic initiatives to reduce our environmental impact resulted in a 49% reduction of our GSGA emissions compared to our 2,007 baseline." --- (SO, AGM, 2024/05/22)

"However, the number of large new loads anticipated to come online in the next 2 years, provides us with confidence that demand will remain steady in the face of any economic challenges for our existing customers." --- (AEP, earning call, 2024/Q1)

"Conversely, mild weather reduces demand. During the three months ended March 31, 2024, compared to the same period in 2023, Operating revenues related to weather increased due to favorable weather conditions in Delaware electric and natural gas service territories." --- (EXC, sec filing, 2024/Q1)

"Notably, these customers continue to convey expectations for growing power needs in the second half of the year." --- (DUK, earning call, 2024/Q1)

Regulatory and Environmental Considerations

Companies like NextEra Energy and Chevron emphasize the importance of a constructive regulatory environment and evolving sustainability standards. ExxonMobil highlights the dynamic nature of environmental regulations and the need for strategic objectives tied to environmental performance, underscoring the complex interplay between regulatory frameworks and environmental considerations in meeting U.S. power demand.

"Our focus on putting the customer first, delivering high reliability and low bills leads to our constructive regulatory environment that enables us to continue to deliver a leading value proposition." --- (NEE, Investor Day, 2024/06/11)

"In addition, historical, current, and forward-looking environmental and other sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future, including future rule-making." --- (XOM, sec filing, 2024/Q1)

"Implementation of jurisdiction-specific policies and programs can be dependent on, and can affect the pace of, technological advancements, the granting of necessary permits by governing authorities, the availability and acceptability of cost-effective, verifiable carbon credits, the availability of suppliers that can meet our sustainability-related standards, evolving regulatory or other requirements affecting ESG standards or other disclosures, and evolving standards for tracking, reporting, marketing and advertising relating to emissions and emission reductions and removals." --- (CVX, sec filing, 2024/Q1)

"You've got a great legislative environment, you've got a constructive regulatory environment, and you've got the growth that you need in order to deploy capital in the state." --- (NEE, Investor Day, 2024/06/11)

"Our executive comp program is tied to a range of strategic objectives designed to drive growth and shareholder value and position the company for success in any environment.Pay outcomes are tied to safety, operational, environmental and financial performance, as well as optimizing our existing business portfolio and building new businesses to deliver leading results decades into the future, irrespective of the pace of the energy transition." --- (XOM, AGM, 2024/05/29)

Technological Advancements in Natural Gas Power Generation

Technological advancements in natural gas power generation are being driven by innovations like SLB's EcoShield™ and PowerDrive Orbit™ systems, which reduce emissions, and the industry's focus on fit-for-basin technology. Additionally, significant investments in gas infrastructure and the construction of more natural gas-fired power plants are essential to meet the growing demand.

"Highlights include the following: In the Midland Basin, SLB received an award from Pioneer Natural Resources recognizing its work in reducing greenhouse gas emissions through use of the EcoShield™ geopolymer cement-free system and PowerDrive Orbit™ rotary steerable system." --- (SLB, press release, 2024/04/19)

"So I'm curious about your customer conversations, how they're thinking about, how do we get this gas to market, how do we size up crews or size up equipment and get ready for what's going to be a surge in demand and kind of pair that with constructing more natural gas-fired power generation and things of that nature to meet data centers and AI demand?" --- (HAL, earning call, 2024/Q2)

"Following the recent announcement to not pursue an increase to its maximum sustainable capacity, the country's shifting focus towards natural gas where production is now expected to increase by more than 60% through 2030, will require significant investment in gas infrastructure." --- (BKR, earning call, 2024/Q1)

"This is an optimal environment for our business, and we are seizing each of these opportunity. In the Middle East, in addition to the exposure to the oil capacity expansion program across the region, we continue to benefit from the acceleration and scale of investments in gas development, both conventional and unconventional, leveraging our fit-for-basin technology and differentiated integration capability. Offshore, we see the benefits of our OneSubsea JV as highlighted by the number" --- (SLB, earning call, 2024/Q2)

"Through 2040, we expect natural gas demand to grow by almost 20%, representing a 1% CAGR driven growth in underlying energy demand and the desire to drive towards a net-zero energy ecosystem." --- (BKR, earning call, 2024/Q1)

Economic Impact of Natural Gas

Natural gas significantly impacts the economy by influencing utility earnings, meeting energy demands for economic development, and being subject to global economic conditions and regulatory actions. Additionally, lower natural gas prices can reduce operating expenses, while long-term demand and strategic low-cost supply projects present growth opportunities.

"With the exception of Atlanta Gas Light, Southern Company Gas' second largest utility that operates in a deregulated natural gas market and has a straight-fixed-variable rate design that minimizes the variability of its revenues based on consumption, the earnings of the natural gas distribution utilities can be affected by customer consumption patterns that are a function of weather conditions, price levels for natural gas, and general economic conditions that may impact customers' ability to pay for natural gas consumed." --- (SO, sec filing, 2024/Q1)

"We believe natural gas must be a part of not just Duke's but our nation's energy transition strategy in the face of unprecedented demand from AI data centers, chips manufacturers and other economic development, natural gas remains an essential tool to provide reliable and affordable energy for customers and complements our substantial investments in renewables and energy storage." --- (DUK, earning call, 2024/Q1)

"Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions imposed by OPEC+ countries, actions of regulators, weather-related damage and disruptions, competing fuel prices, natural and human causes beyond the company’s control, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty." --- (CVX, sec filing, 2024/Q1)

"We also see long-term demand for natural gas, and so I think as we look at both of those, both the liquids and the gas side of the equation, we see a long-term future there and an opportunity for this company to participate if we have advantaged projects that position us on a low cost of supply, and so that's how we think about that." --- (XOM, earning call, 2024/Q1)

"• Operating expenses decreased $275 million primarily due to a $273 million decrease in cost of natural gas as a result of lower gas prices and lower volume sold compared to 2023, partially offset by higher depreciation resulting from additional assets placed in service, higher compensation and benefit expenses, and higher revenue taxes." --- (SO, sec filing, 2024/Q1)

Future Outlook for Natural Gas in U.S. Power Demand

Fossil fuels, including natural gas, will remain crucial in the U.S. energy mix for the foreseeable future, with companies like ExxonMobil and Chevron emphasizing their ongoing importance. Duke Energy and Southern Company are expanding natural gas infrastructure, while NextEra Energy highlights the cost competitiveness of renewables paired with gas facilities.

"Jim Chapman: All right, next question. We saw a number of comments on the fact that the U. S. And the world will continue to need fossil fuel based energy for the foreseeable future. Can you share what ExxonMobil is doing to meet demand?" --- (XOM, event transcript, 2024/05/29)

"Although the future is uncertain, many published outlooks conclude that fossil fuels will remain a significant part of an energy system that increasingly incorporates lower carbon sources of supply for many years to come." --- (CVX, sec filing, 2024/Q1)

"And so we have been at work over the course of 2023 and putting in place agreements that we believe will not only continue to strongly support the existing gas in our area, but also allow us to expand." --- (DUK, earning call, 2024/Q1)

"The increase for the first quarter 2024 was primarily due to an increase of 26.3% in the volume of KWHs purchased as Georgia Power and other Southern Company system units generally dispatched at a higher cost than available market resources, partially offset by a decrease of 8.8% in the average cost per KWH purchased primarily due to lower natural gas prices." --- (SO, sec filing, 2024/Q1)

"But even if you look at renewables and storage on a 7 by 24 profile basis, you integrate these resources into the grid with storage technologies, or you pair them with peaking gas facilities. New renewables plus the addition of storage remain lower cost than the new combined cycle natural gas plant." --- (NEE, event transcript, 2024/06/11)