A Comprehensive Summary of the January 2025 STEO for Power And NatGas Markets

1. Natural Gas Supply

Domestic Dry Production:

• Permian Basin: Production is forecasted to increase from 21.4 Bcf/d in 2024 to 22.1 Bcf/d in 2025, supported by high drilling efficiency and expanded pipeline capacity. Growth continues into 2026 at a slower pace, reaching 22.7 Bcf/d.

• Haynesville Basin: Output is expected to remain stable at approximately 14.5 Bcf/d in 2025, reflecting moderate drilling activity and plateauing well productivity.

• Appalachia Basin: Production is projected at 34.3 Bcf/d in 2025, a slight increase from 2024 levels, but constraints in pipeline takeaway capacity limit further growth.

Canadian Imports:

• Pipeline imports from Canada are forecasted to average 4.8 Bcf/d in 2025, down slightly from 2024 levels due to increased domestic production and LNG exports in the U.S.

Key Indicators:

• Drilling Rigs: The rig count remains stable in the Permian but shows modest declines in Haynesville and Appalachia.

• DUCs and TILs: Declining drilled-but-uncompleted (DUC) inventories are a potential constraint on near-term production growth, with completions outpacing new drills.

2. Power Generation Demand

Natural Gas Demand:

• U.S. power generation demand for natural gas is forecasted to decline by 3% in 2025 and an additional 1% in 2026, influenced by rising gas prices and increased renewable capacity.

Coal Markets:

• Production is forecasted at 476 MMst in 2025, down from 512 MMst in 2024. This reduction reflects a combination of structural and market-driven factors:

  • Retiring Coal Plants: Accelerated retirements of aging coal-fired plants are reducing demand for coal as utilities pivot towards renewables and natural gas.

  • Rising Fuel Costs: Higher mining costs and transportation expenses are squeezing margins, leading to production cuts.

  • Stockpile Declines: Coal inventories at power plants are expected to fall to 103 MMst in 2025, a significant drop from 2024 levels. Utilities are increasingly relying on these stockpiles to offset reduced production, further reducing the need for new coal output.

  • Export Markets: Global coal demand remains weak, particularly for thermal coal, amid competition from other exporting nations and increased emphasis on decarbonization.

Renewables:

• Solar: The sector leads growth, with 26 GW of new capacity in 2025 and 22 GW in 2026, boosting solar generation by 34% and 17%, respectively. This surge in solar output will significantly reduce reliance on natural gas during peak daylight hours, particularly in regions like the Southwest and Southeast.

• Wind: Wind capacity additions reach 12 GW by 2025, contributing to a 13% increase in generation. Wind power’s intermittency, however, ensures continued, albeit reduced, demand for natural gas as a balancing resource during periods of low wind output.

• Other Sources: Nuclear and hydropower generation remain stable, with nuclear growing slightly in 2025. Hydropower may vary based on weather conditions, indirectly impacting gas-fired power as a backup resource.

Impact on Natural Gas:

• The rapid expansion of renewables will displace natural gas in power generation, contributing to a forecasted 3% decline in natural gas consumption by the power sector in 2025. This trend intensifies as renewable penetration grows, with natural gas increasingly serving as a secondary source to complement variable renewable output.

• Battery storage additions (14 GW in 2025 and 11 GW in 2026) will further enhance the integration of renewables, reducing the frequency and duration of natural gas ramp-up needs. However, natural gas will still play a crucial role in ensuring grid reliability, particularly during prolonged periods of low renewable generation or extreme weather events.

3. LNG Feedgas Demand

Historical Trends and Forecast:

• LNG feedgas demand is set to rise from 12 Bcf/d in 2024 to 14 Bcf/d in 2025, driven by new facilities such as Plaquemines LNG and Corpus Christi Stage 3, both operational since December 2024.

• By 2026, LNG feedgas demand will increase further to 16 Bcf/d with the addition of the Golden Pass facility mid-year.

Operational Insights:

• Existing facilities operated near full capacity in late 2024. New projects are expected to maintain high utilization rates to meet global demand.

4. Natural Gas Storage

Historical and Forecast Levels:

• Storage began 2025 with a surplus of 6% above the five-year average. End-of-March levels are forecasted at 1,450 Bcf, while end-of-October inventories are expected at 3,500 Bcf, just below historical norms.

Implications:

• Storage drawdowns are anticipated due to increased LNG exports and steady winter heating demand, supporting upward pressure on prices.

5. Infrastructure Developments

Pipeline Projects:

• The Southeast Expansion Pipeline, expected to add 1.2 Bcf/d of capacity in Q3 2025, will enhance supply flexibility across high-demand regions in the Southeastern U.S., particularly during peak cooling and heating seasons.

• Mountain Valley Pipeline (MVP): Recently completed, this project will deliver 2 Bcf/d of natural gas from the Appalachian Basin to markets in the Southeast, reducing transportation bottlenecks and providing additional supply for LNG terminals.

• Permian Highway Expansion: Scheduled for late 2025, this project adds 1.5 Bcf/d of capacity, alleviating Permian production constraints and enabling greater market reach.

• Additional regional pipeline upgrades in Texas and Louisiana are anticipated to increase takeaway capacity, supporting the ongoing growth of LNG exports.

LNG Projects:

• Golden Pass LNG (2.1 Bcf/d capacity) is on track for mid-2026 completion.

Other Developments:

• Data center expansions in Texas and Virginia are increasing local power demand, indirectly influencing regional natural gas consumption.

6. Natural Gas Prices

Henry Hub Forecasts:

• The Henry Hub spot price is expected to average $3.10/MMBtu in 2025, up from $2.20/MMBtu in 2024, and rise further to $4.00/MMBtu in 2026.

Price Drivers:

• 2025: Rising LNG exports and tighter storage levels are the primary bullish factors.

• 2026: Continued LNG demand growth and moderate supply increases keep prices elevated.

• Market Volatility: Weather remains a key risk, with colder winters potentially driving price spikes.

Historical Context:

• Prices hit historical lows in 2024 due to surplus production but are now normalizing amid rising global demand and slower production growth.

THIS REPORT WAS FULLY WRITTEN BY THE CHATNRG NATGAS AGENT