U.S. Gas Power Boom Threatens LNG Export Growth
The United States is rapidly expanding gas-fired power generation, boosting domestic demand and tightening supplies. But the surge threatens to clash with LNG exporters counting on cheap U.S. gas to stay competitive in global markets.
(Reuters) — U.S. power firms are building out the most gas-fired power generation capacity globally, which will cement the country's position as by far the world's largest natural gas consumer and gas-fired power producer.
But the growing reliance on natural gas for domestic power generation also stands to stoke tensions with the fast-growing LNG export sector, which is banking on access to abundant and cheap natural gas to drive further expansion.
Growing competition for U.S. natural gas by power firms and LNG exporters could also drive up natural gas prices, which may thwart efforts to reduce power bills for homes and businesses and undermine the competitiveness of U.S. LNG on world markets.
Hitting The Gas
The United States accounts for roughly a quarter of global gas production, use and exports, and around 27% of worldwide electricity generation from gas-fired power plants, data from the Energy Institute and energy think tank Ember show.
Within the global gas power generation network, the United States accounts for 26% of total currently operating gas power capacity, data from Global Energy Monitor (GEM) shows.
The roughly 570,000 megawatts (MW) of gas capacity currently deployed in the U.S. vastly exceeds that of all other countries, including the 166,000 MW in second-placed China and 113,000 MW in third-placed Russia.
The U.S. ranks third in terms of gas capacity currently under construction, as China is building out roughly 41,000 MW of new capacity compared to 24,000 MW by Saudi Arabia and 16,300 MW being constructed in the U.S., GEM data shows.
But the U.S. regains the top spot in terms of gas capacity in so-called pre-construction, which is where generation sites are identified and appropriate permits are being secured ahead of actual construction.
Fast-Growing Pipeline
The U.S. has close to 100,000 MW of new gas-fired power capacity in the pre-construction phase, according to the latest data captured globally by GEM.
That capacity total is notable for two important reasons.
Firstly, the U.S. total handily exceeds the planned capacity pipeline at the same development phase in all other countries, including second-placed China's 61,500 MW and the 29,200 MW in pre-construction in third-placed Vietnam.
That relatively larger development pipeline means that U.S. gas-fired power capacity will grow more quickly than in other countries over the near to medium term.
Secondly, the U.S. pre-construction total is more than six times larger than it was just one year ago, when 15,000 MW of new gas-fired power capacity was categorized as being in pre-construction.
The rapid swell in U.S. gas capacity in pre-construction since mid-2024 highlights the urgent steps being taken by U.S. power firms to boost generation by all means available, in response to rapidly growing power demand from data centers, AI applications and other major electricity consumers.
The sharp jump in gas capacity also highlights the impact of the return to office by U.S. President Donald Trump, whose administration has drastically cut federal support for renewable power supplies and backed rapid fossil fuel power growth.
LNG Impact
The acceleration in U.S. gas-fired power generation capacity means the power sector will increase the amount of natural gas it consumes once that capacity is brought online.
For LNG exporters, this means there will be heightened competition for natural gas supplies within the U.S., and potentially higher gas prices in the physical gas market.
Somewhat offsetting the impact of higher gas use from power firms are expectations U.S. natural gas production will climb in 2025 by around 3% from 2024's near-record total to new highs, according to the U.S. Energy Information Administration.
However, those gas production estimates are subject to change and are based in part on projections for oil prices, which can drive oil and gas extraction rates from gas-rich oil deposits in the United States.
So far in 2025, benchmark U.S. crude oil prices have fallen by over 10% due to higher production from OPEC members and slow oil demand growth in key oil import markets.
Oil prices could fall further if ongoing discussions between the U.S. and Russia to end the war in Ukraine prove successful and result in an easing of sanctions of Russian oil supplies.
Such a scenario could trigger a slowdown in oil and gas production within the U.S., and a potential tightening in domestic gas supplies if demand from power firms and LNG exporters remains firm.
Production Peak Looming
Regardless of the near-term production picture, overall U.S. natural gas output will peak early in the next decade and then hold relatively flat through 2050, according to the EIA's latest long-term energy outlook.
That assessment is based on the future production from key U.S. gas basins, many of which have passed their output peaks and are now considered to be in terminal decline.
That outlook still implies abundant gas supplies over the coming years, which should be enough to allow for growth from both power users and LNG exporters.
However, a key unknown for the gas market is the extent of further demand growth from the power sector, which is clearly in an expansion phase that could accelerate if the supply of alternative power sources grows by less than projected.
The recent policy shifts by the Trump administration to slash support for renewable energy projects have the potential to steer utilities away from adding more solar and wind farms towards adding more gas-powered capacity.
That in turn could lift gas demand for power by another gear, and trigger a sustained tightening in the U.S. gas market that could steadily underpin gas prices and result in intensifying competition with LNG exporters for supplies.
The opinions expressed here are those of the author, a columnist for Reuters.