DAVID BLACKMON: Are Boom Times Ahead For U.S. Natural Gas? Not So Fast, Says One CEO

Natural gas prices in the United States have been chronically low since 2009, hovering mostly at the lower end of a range bound at $2/MMbtu at the bottom and a high of $5/MMbtu. The only truly notable exception to this 16-year paradigm came in the post-COVID period during the Biden years, when supply chain complications and high inflation caused shortages and created a spike in prices lasting from mid-2022 through mid-2023.

But now, the CEO at one large gas-focused independent driller is warning his peers they should be developing plans to deal with a high degree of volatility in the coming years amid rapidly rising demand for natural gas coming mainly from the rapid expansion of liquefied natural gas (LNG) exports and the explosion of huge, power-hungry AI datacenters.

In an interview with Semafor, Nick Dell’Osso, CEO at Oklahoma-based Expand Energy (formerly Chesapeake Energy) warns that the nascent buildout of major new pipelines and LNG export capacity now underway thanks to the Trump administration’s about-face on permitting is not necessarily a positive for natural gas producers. Dell’Osso says this new market dynamic will likely result in new supplies of the product arriving in “large, chunky volumes,” which could result in frequent price crashes. “If you’re better at responding to volatility, then you position your company for better returns,” Dell’Osso added, advising other independents to build plans that would enable them to quickly reduce production when such gas gluts occur. (RELATED: California Lawmakers Squeezed Refineries Out, Now Scramble To Pay One Well-Known Company To Keep Theirs Running)

Dell’Osso’s remarks are notable since they cut against the grain of prevailing thought that the rapidly rising electricity needs of datacenters and expanding global markets for U.S. LNG exports would create boom times for one of America’s most abundant and affordable energy resources.

Datacenter developers interested in providing their own behind-the-meter power needs have over the last year expressed a strong preference for natural gas as their main generation fuel for at least the next 10-15 years. Gas stands to benefit even from those who plan to obtain power from the local grid given that it currently accounts for 46% of U.S. generating capacity, making gas by far the biggest single fuel for meeting the nation’s growing electricity needs.

After a half decade of seeing its growth rate eclipsed by government subsidy-driven wind and solar generation, new data compiled by Global Energy Monitor indicates natural gas capacity is set to skyrocket in the coming years. Reuters reports that gas developers currently have over 114 GW of new gas capacity either in the pre-construction phase or actively under construction as of today. At the same time, wind and solar developers are now cutting back growth plans in response to the phasing out of their big federal subsidies mandated in the One Big Beautiful Bill Act.

But the reality for gas producers is that, regardless of how rapidly demand from datacenters and LNG exports expands, the pure magnitude of the U.S. gas resource would seem certain to quickly fill the need and more, placing a hard cap on any long-term spikes in prices like those seen in 2022-23. If the “large, chunky volumes” anticipated by Dell’Osso do materialize as new pipeline capacity comes online, then the hoped-for boom times for gas producers could well turn into a much more difficult to manage scenario.

All that said, oil and gas is a notoriously cyclical, boom-and-bust industry in which the long-term survivors have always been forced to manage through hard times. Expand Energy itself, which emerged out of last year’s merger of Chesapeake with Southwestern Energy, is no stranger to such times. Predecessor company Chesapeake famously declared Chapter 11 bankruptcy in June, 2020 and managed through its debt reorganization to emerge the following February in a healthier financial position. Prior to that, management teams at both Chesapeake and Southwestern had been forced to manage through the quick succession of boom-and-bust cycles which have characterized the U.S. gas business throughout this century.

It also must be pointed out that predicting the oil and gas markets has been a difficult and often perilous proposition since the industry’s founding more than 160 years ago. So, Dell’Osso offers wise advice here: Gas-heavy drillers should hope for the best but be prepared for the worst.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

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