Data centers’ need for electric power is creating opportunities for natural gas producers to capture premium pricing at in-basin hubs that typically trade at discounts to the Henry Hub benchmark price. The scale of demand could upend regional price differentials, especially in the Permian Basin.
“Many times, producers will take the view of, ‘I just want to move the gas so I can still produce oil,’” Bracewell’s Bryan Clark said on a recent episode of Natural Gas Intelligence’s “Hub & Flow” podcast.
“And so in that respect, if they have an easy outlet, in other words – ‘Just sell at Waha, I don’t care what it is, we’re just going to move on’ – then what they end up doing is selling at an index price and don’t want to go through the time and effort of trying to negotiate an uplift,” Clark said.
Now, with growing interest from data center developers, exploration and production companies can help add generation assets and receive a higher premium for their gas, Bracewell’s Jared Berg said on the podcast.
Energy is somewhere around 20 percent or less of the overall capital outlay for data centers, with more emphasis on timelines for development rather than power costs, Berg said. “So that also creates opportunities for upstream and midstream developers because these data centers are focused on speed to power.”
