The #1 Prognostication for 2025 is …
- Chill, Baby, Chill – Trump’s 2025 Energy Goals Face New Industry Realities. No discussion of our 2025 Prognostications would be complete without addressing President-elect Trump’s pledge to revive the ”Drill, baby, drill" mantra and reignite robust oil and gas production. During the 2024 campaign, Trump promised to get energy workers “pumping, fracking, drilling and producing like never before.” However, as many energy industry publications and The Wall Street Journal have pointed out, delivering on such ambitions is far easier said than done. Unlike the last decade, when the first Trump administration oversaw a 3-MMb/d increase in oil production (before COVID erased a third of that growth), the mid-to-late 2020s present a markedly different landscape. The era of wildcatters and small private companies driving rapid production growth has given way to dominance by far more disciplined, financially conservative oil majors. These large players continue to be under significant pressure from Wall Street to maintain financial discipline, prioritizing shareholder returns over aggressive production expansion that, if pursued by many or most E&Ps, would only lower prices and hurt bottom lines. (Pesky, hard-to-resolve infrastructure constraints — like takeaway capacity out of the Marcellus/Utica — also limit how much production could actually rise.) There will be a lot of talk, but for 2025, we are going to stick with our production outlook for a relatively modest 3%, 400-Mb/d increase in crude oil production, and a 2%, 1.9-Bcf/d increase in dry gas production. It’s growth, but nothing crazy.
- Permian Negative Gas Prices Will Be Back Sooner Than Expected. 2024 was an ugly year for natural gas prices in the Permian Basin. Pipeline capacity was maxed out, forcing producers without contractual capacity to pay to have their gas taken away, with Waha prices settling below zero 42% of the time and averaging minus $0.53/MMBtu from March to September. The new 2.5-Bcf/d Matterhorn Express pipeline, launched in October, offered only partial relief as maintenance on other pipelines kept capacity constrained, resulting in persistently low prices through mid-November. Even after a modest recovery from late November through most of December, Waha prices dropped below $1/MMBtu in the last few days of the year. Going into 2025, with Matterhorn running at full capacity, positive prices should dominate most of the year. However, periods of pipeline maintenance are likely to create more rounds of price volatility, including occasional dips below zero. Relief should come in 2026 with two new capacity additions: a 570-MMcf/d expansion of Kinder Morgan's Gulf Coast Express (GCX) pipeline to South Texas’s Agua Dulce hub and the 2.5-Bcf/d Blackcomb pipeline from WhiteWater and Targa, also targeting Agua Dulce. Until then, rising associated gas production will keep the pressure on, with Permian gas output expected to hit takeaway capacity limits between December 2025 and February 2026, raising the risk of prolonged negative pricing until mid-2026 when the new capacity is operational.
- There’s More Hype Than Mcfs in the Natural Gas for Data Centers Gold Rush. Over the past year, few topics have dominated the energy conversation quite like the buzz around data centers designed to support the massive energy needs of artificial intelligence (AI). According to the press releases, natural gas is poised to power more than half of these facilities, with carbon dioxide (CO2) emissions supposedly being managed through carbon capture and storage (CCS). But don’t buy into the hype too quickly. While numerous data centers are indeed in development, natural gas will face stiff competition from wind and solar — green energy sources that data center operators strongly favor over fossil fuels. And so far, CCS is more promise than reality, proving to be excruciatingly difficult to permit and execute. Moreover, utilities are hesitant to invest in the infrastructure needed to support these energy-intensive projects, especially when some operators are reluctant to commit to long-term contracts that justify the expense. No utility wants to risk building costly infrastructure only to see demand fade as the industry discovers ways to reduce AI’s power consumption. Lastly, the timeline for this transformation is likely longer than most experts are suggesting. All these factors combined mean that natural gas demand for data center power generation isn’t expected to see a significant boost in 2025 — or even for a few years beyond that. (For more on the topic of this prognostication, see Smarter Than You.)
- Not Enough New LNG Capacity Coming in 2025 to Support the Current Natural Gas Forward Curve. In the prognostication business, there’s nothing more dangerous than predictions about forward prices, but sometimes you’ve just got to do it. The 2025 natural gas forward curve predicts a $1/MMBtu increase over 2024, from $2.40/MMBtu to $3.40/MMBtu. While this might have seemed plausible with three new LNG export facilities coming on, which is what we expected in early 2024, one delay after another has shifted the timeline. Golden Pass won’t start taking feedgas until late 2025 at best, and Plaquemines LNG, which recently shipped its first cargo, will take 18 months to ramp up fully. The one bright spot is Cheniere’s Corpus Christi Stage III expansion, with Train 1 producing its first LNG in late December (with “substantial completion” of the train to follow by the end of Q1 2025) and two more trains coming online later in the year. But add it all up and ramp actual flows based on what we’ve seen in the past, and on average over 12 months we are talking only 1.6 Bcf/d of new capacity in 2025 over 2024. That is slightly less than the nearly 1.9 Bcf/d growth in U.S. gas production we are projecting, coming primarily from the Permian and Eagle Ford. Of course, an onslaught of cold weather or a hot summer could wipe out 0.3 Bcf/d of market length in a heartbeat. But all things being equal, the odds of a $1/MMBtu increase in natural gas prices next year driven by growth in LNG exports looks pretty dicey.
