The global energy landscape is undergoing a seismic shift. The dual forces of artificial intelligence (AI) proliferation and industrial electrification are driving unprecedented power demand. Data centers, electric vehicles, and onshoring manufacturing are reshaping consumption patterns, making energy demand more inelastic and urgent. In this context, natural gas is emerging not merely as a transitional fuel but as a foundational pillar of the future energy mix. Due to the intermittency of renewables and the long lead times for nuclear, natural gas-fired power plants are the most viable option for providing reliable, round-the-clock electricity to data centers. Therefore, we expect upstream natural gas producers to benefit from growing global demand and higher US natural gas prices.

The globalization of U.S. shale gas is central to this transformation. 175 mtpa (million tons per annum) of new LNG (liquified natural gas) export capacity is under construction globally in an existing LNG market of 400 mtpa. Over half of the incremental supply is coming from the US. Therefore, the U.S. is poised to become a dominant supplier to the fast-growing Asian market. Demand is expected to grow at a 5% CAGR through 2030 in Asia. Today, Asia accounts for 25% of natural gas demand and is expected to increase to 33% by 2030, according to Morgan Stanley. See Exhibit 1 which depicts Gas/LNG demand growth by region.

Exhibit 1: Gas/LNG Demand Growth Expectations

Source: Morgan Stanley

LNG prices today are around $12/mmbtu (million British thermal units) and Morgan Stanley expects them to head towards $10/mmbtu as LNG supply increases. They view $10/mmbtu as an inflection point for mass adoption in price-sensitive markets like India and Southeast Asia. This price level is competitive with coal and as natural gas burns significantly cleaner, it will enable a shift in power generation mix towards gas. Since much of the supply is coming from the US, US natural gas prices are expected to remain firm. Additionally, recently lowered US oil production will produce less associated natural gas which will further tighten US natural gas market. Together, these dynamics will support upstream investment in natural gas resources in the US. See Exhibit 2 which shows the pricing arbitrage opportunity for the US to export relatively cheap natural gas to higher priced global markets.

Exhibit 2: Gas/LNG Prices

Source: Morgan Stanley

In the U.S., this export boom will have profound implications for domestic natural gas prices and the upstream sector. While the influx of global LNG supply (See Exhibit 3. for Supply/Demand Forecast) may keep international LNG prices headed towards $10/mmbtu, the Henry Hub benchmark is expected to stabilize in the $3.75–$5.00/mmbtu range over the long term compared to $3.67 today. U.S. exploration and production companies are poised for a multi-year earnings expansion. The doubling of U.S. LNG export capacity by 2030 will lift domestic gas demand by 10 Bcf/d (billion cubic feet per day) or 10%, tightening supply-demand balances. Additionally, data centers are expected to increase demand in the US by another 10 Bcf/d by 2030.

Exhibit 3: LNG Supply Demand Forecast

Source: Morgan Stanley

As power demand becomes more inelastic and baseload-intensive, natural gas will play a critical role in grid stability and energy security. This underpins a favorable environment for upstream producers. This will drive higher utilization of existing infrastructure, improve operating leverage, and support strong earnings growth through the end of the decade for natural gas producers in the US.