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Contrasting outlooks for oil and gas in the US
The rise of AI and LNG exports create attractive opportunities for gas
9 minute read
Ed Crooks
Vice Chair Americas and host of Energy Gang podcast

Ed Crooks
Vice Chair Americas and host of Energy Gang podcast
Ed examines the forces shaping the energy industry globally.
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President Donald Trump has said he doesn’t like the slogan “Drill, baby, drill”, because it has become too much of a cliché. But it is still a commonly used message from his administration.
First coined in 2008 by Republican politician Michael Steele, as a play on the 1960s radicals’ chant “burn, baby, burn”, it encapsulates a central goal of the party’s energy policy: increasing oil and gas production.
Even if you have your doubts about the slogan, the reality behind it is undeniable. The surge in US drilling activity that began in 2003 changed the world, transforming the nation from an oil importer to an exporter, and cutting energy costs for consumers at home and abroad.
However, President Trump’s ambitions to make the oil and gas industry a key driver of economic transformation in his second term appear to have been disappointed, at least so far. The number of rigs drilling for oil and gas in the US has fallen since he took office, from 576 at the time of the inauguration in January, to 542 this week, according to Baker Hughes, the oilfield services group.
The primary drivers of drilling activity in North America are commodity prices, corporate cash flows and capital allocation strategies, not government policies. And those factors have not, in general, incentivised management teams to pursue growth this year.
“Drill, baby, drill” may work well at political rallies and on social media. It is less of a winning message in boardrooms and in investor meetings.
That said, there is an important distinction between oil and gas. While the number of rigs drilling for oil in the US has dropped over the past year by 67, or 14%, the number of rigs drilling for gas has risen by 21, or 21%.
The Trump administration’s claims of “unleashing” US energy may be over-hyped. But in the gas industry, something real is happening.
The Wood Mackenzie view
The trends in activity for oil and for gas “could not be more different,” says Ryan Duman, a director on Wood Mackenzie’s US Upstream research team. The number of active rigs in the oil-focused Permian Basin has fallen by 44 this year, while the number in the Haynesville gas-producing play has risen by 10.
Those contrasting trends reflect significant differences in demand and price outlooks. For oil, market conditions are challenging. Crude prices have risen in the past week, supported by President Trump threatening to use secondary sanctions to hit Russia’s oil exports. But on Wood Mackenzie’s base case view, crude prices will be lower next year than this.
In the longer term, we project global oil demand to hit a plateau in the early 2030s. We see US production levelling off before then. And if crude prices do drop significantly next year, with West Texas Intermediate remaining below US$60 a barrel for a sustained period, then we would expect US oil production from the Lower 48 states to fall even faster than our base case.
For gas, the outlook is very different. Two factors are driving US demand higher: increased gas-fired power generation and a surge in LNG exports.
Wood Mackenzie is forecasting that North America’s domestic gas demand plus exports will rise by about 33% over the next 10 years, from about 1.26 trillion cubic metres (tcm) in 2025 to about 1.67 tcm in 2035.
Within those numbers, LNG exports are expected to more than double, rising from about 143 billion cubic metres (bcm) to about 373 bcm over the same period. The momentum in the US LNG industry was highlighted this week by Venture Global, which announced that it had taken the final investment decision to proceed with its CP2 LNG plant in Louisiana.
Meanwhile, expectations for US domestic gas demand have been revised up sharply because of projected growth in gas-fired power generation. Data centres for AI and new factories are driving a surge in US electricity demand, and gas-fired plants will play a key role in meeting that increased demand.
One of the main themes of President Trump’s Pennsylvania Energy and Innovation Summit two weeks ago was using the gas resources of the Marcellus and Utica shales to supply new generation to power data centres for AI. Blackstone and PPL have formed a joint venture to build combined-cycle gas turbine plants in Pennsylvania. They have already secured potential sites, and are working with pipeline companies and manufacturers to secure gas supplies and turbines.
US gas producers are already moving to take advantage of these trends. EQT this month signed two supply agreements, covering about 20% of its total production, for gas-fired power plants at two sites in Pennsylvania.
Robert Clarke, Wood Mackenzie’s vice president of Upstream research, said the deals “mark a strategic turning point for Appalachian producers”. They signal the rise of a new asset class for Lower 48 shale gas: driven by data centre demand, adjacent to infrastructure and supported by long-term contracts.
Although activity has been increasing, this new demand growth has not yet led to a surge in investment. Some of the leading listed gas-focused E&Ps are restraining their spending and prioritising financial strength, because they still face pressure from investors to maintain capital discipline, cut borrowings and return cash to shareholders.
Most of the recent upturn in activity and M&A in US gas has come from privately held companies and international groups, including both operators such as TG Natural Resources and Osaka Gas, and non-operated players such as TotalEnergies and Mubadala.
That means there will still be attractive opportunities available, according to Wood Mackenzie’s Duman. “The window of opportunity is now,” he says. “Those who move early can form the right partnerships, capture the best inventory and structure the right marketing agreements with demand centres, including both LNG players and AI-linked hyperscalers.”
The Trump administration moves to undo fundamental climate ruling
The Trump administration has launched a review of the “endangerment finding”: the regulatory decision that greenhouse gases such as carbon dioxide, methane and nitrous oxide threaten public health and welfare. If successful, the move would remove the legal basis for current emissions standards for vehicles and make it harder for future administrations to regulate greenhouse gases.
The finding was made by the Environmental Protection Agency (EPA) under the Obama administration in 2009, in response to a Supreme Court ruling in 2007. Initially used to set standards for vehicles, it has also underpinned attempts to regulate emissions from other sectors, including power generation.
Lee Zeldin, head of the EPA, said reversing the finding would save US businesses and families US$1 trillion or more in regulatory costs. If finalised, the move would remove all greenhouse gas standards for vehicles in the US, going back to regulations first applied in 2010.
The EPA said new scientific and technological developments had changed the position since the 2009 ruling. It also argued that recent Supreme Court judgments showed that decisions on major policy issues such as climate change must be made by Congress, not by administrative agencies.
The agency added that, along with a package of deregulatory measures announced in March, the move to overturn the endangerment finding “represents the death of the Green New Scam and drives a dagger straight into the heart of the climate change religion”.
In support of the EPA’s move, the Department of Energy (DoE) published a report on the impact of greenhouse gas emissions on the US climate. The report’s authors, five scientists including Judith Curry and Steven Koonin, concluded that “carbon dioxide-induced warming appears to be less damaging economically than commonly believed” and argued that aggressive mitigation strategies could be more harmful than beneficial. Three of the five authors were recently hired by the DoE.
An article in Science, the journal published by the American Association for the Advancement of Science, said mainstream climate scientists would acknowledge some of the report’s points, but also cited critics of its use of evidence and key conclusions.
The DoE report, and the review of the endangerment finding, are now open for public comment.
In brief
The EU and US reached a new trade deal, with energy a central part of the agreement. As part of the deal, the EU has pledged to import US$750 billion worth of energy from the US over the next three years, prompting some scepticism among commentators.
The European Commission published an explanation of the energy plan, showing that it would mean more than doubling EU imports of US oil, gas and nuclear fuel, which are currently running at about US$100 billion a year. The Commission suggested that replacing EU energy imports from Russia, and importing nuclear technology, including small modular reactors, could help close the gap to US$250 billion a year.
Leading Chinese producers of polysilicon, used in solar panels, are in talks about working together to buy and shut down roughly a third of the industry’s production capacity, Reuters reported.
One of the world’s largest offshore wind projects, Berwick Bank in the North Sea, has been given the go-ahead by the Scottish government, despite opposition from wildlife groups concerned about the impact on seabirds. The project, which will have a capacity of up to 4.1 gigawatts, is seen as essential for meeting the UK government’s goals for offshore wind development.
Meanwhile, the US government has rescinded its designations of areas of federal waters as suitable for offshore wind development.
Other views
Powering China’s data centres – Simon Flowers, Sharon Feng and Gavin Thompson
Wood Mackenzie Study Reveals Critical Risks of Europe's "Dunkelflaute" Renewable Energy Droughts
Open season activity signals renewed push for interstate gas pipelines – Daniel Myers and Devin Cao
The fundamentals behind summer’s strong gas injections – Eric McGuire
What are the energy transition technologies to watch in 2025? – Lindsey Entwistle and Roshna N
A climate-saving lithium mine could doom an endangered desert flower – Sammy Roth
Chevron prepares for US oil supermajor battle with Exxon – Jamie Smyth
Quote of the week
“North Sea Oil is a TREASURE CHEST for the United Kingdom. The taxes are so high, however, that it makes no sense. They have essentially told drillers and oil companies that, “we don’t want you.” Incentivize the drillers, FAST. A VAST FORTUNE TO BE MADE for the UK, and far lower energy costs for the people!”
President Donald Trump, who visited the UK this week, was sharply critical of the country’s oil and gas tax regime.
Chart of the week
This comes from our latest Horizons report: ‘Staying power – How new energy realities risk extending coal's sunset’, by Anthony Knutson and David Brown. It shows global coal demand, actual and projected, to 2050 in Wood Mackenzie's base case forecast. You can see how consumption is dominated by China (maroon) and India (pink). Asia as a whole accounts for about 78% of global coal use.
The key point is that the Wood Mackenzie forecast, which is consistent with about 2.5 °C of global warming by the end of the century, depends on a steep decline in China's coal consumption over the next couple of decades. The report tackles the question: what if coal consumption does not fall in line with that projection?
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