You want the bottom line when it comes to natural gas on the Gulf Coast?
“We have not been finding enough new fields.”
That’s William DeMis, president of Richelle Court, LLC, who said that, in addition to not finding enough, we keep erecting new ways to export what we’re not finding.
“We continue to expand (liquefied natural gas) export facilities. My thesis is that to understand the natural gas market in America, you don’t have to understand every molecule of natural gas in every LNG tanker around the planet,” he said.
You just have to look to the bayou.
“Look at Southwest Louisiana and the net flows of natural gas into and out of Southwest Louisiana to know where natural gas prices will be going,” said DeMis.
And he believes that will translate to a 10-billion-cubic-feet-per-day shortfall by 2028. “To put that number in perspective, that is two-thirds of the production reported by the EIA for the Haynesville region,” he said.
The reason Southwest Louisiana is important, he explained, is because that is where essentially all of the LNG export facilities are located (and will be located), and it’s where many of the petrochemical plants are as well.
There are three gas pipelines coming in from the Permian that will be bringing 7 Bcf per day of Permian gas into the Gulf Coast.
“It all comes down to a little bit of simple math: What are the inflows into the Gulf Coast from sources like the Permian or the big Haynesville field by 2028? And how much gas will be going out in the form of LNG by 2028?”
Production curves for the Barnett and Fayetteville Shale Plays. Gas production declined rapidly after a 3- to 4-year plateau. These fields might be instructive in predicting of Haynesville decline. (from DeMis, 2025)
A Frenzy of New Demand
Possible Haynesville field production by 2028 (from DeMis, 2025)
Haynesville field is in decline now, though, and operators have learned their lesson to not overdraw the field and thereby crash the price of natural gas.
“But the gas will be needed, especially with the added demand coming from all those data centers. My math shows that if ERCOT (Electric Reliability Council of Texas) approves the data centers connections submitted just this year – about 100 gigawatts – then there will be an additional demand of 13.6 BCFG per day,” he said.
DeMis said he feels this current frenzy in utilities connection applications will force ERCOT to do what PJM Interconnection, the Mid-Atlantic region’s utility transmission organization, did in 2022: put a moratorium on connection applications.
“PJM got slammed with 1,200 connection requests, primarily from solar projects. Fast forward to today, news services are reporting that PJM might not allow data centers to be connected until they secure power generation and transmission lines,” noted DeMis.
But we have seen this movie before: back in 2022, utilities had had enough with all the wind and solar applications and just said, “No more!”
“It was not that the projects were bad or wrong, it was just that the utility companies could not digest the sheer number of applications. The number of data centers, and the amount of power each DC uses, is not sustainable,” he explained.
DeMis also remarked that, to some extent, the number of applications “reflects a bit of gamesmanship on the part of Big Data, where everyone wants to get in an application before utilities do like PJM did in 2022 and closed the door to all applications.”
PJM is possibly moving to require data centers to come with power already built before they get a connection permit.
“Seems fair to me” said DeMis.
The way, he said, to avert the coming shortage is for people to find new sources of gas outside of Haynesville field, which for years, considering its proximity to the Gulf Coast, and the petrochemical plants of Southwest Louisiana, as well as pipelines, made it a swing producer for natural gas.
“But I can tell you from bitter experience over the last three years that finding people to fund greenfield exploration is darn near impossible. There is scant capital to drill natural gas wildcats in the U.S.” said DeMis.
The other factor is the natural decline in gas plays like the Barnett and Fayetteville, both of which grew to a plateau that held quasi-stable for three to five years before declining. Operators are realizing there is no economic incentive to stand up rigs when natural gas prices are below 3.50 or $5 per thousand cubic feet.
What frustrates him, DeMis said, is that there is money for AI computing centers and even money for power centers.
“I asked the last good folks pitching a (private equity) investment for a power generation project, ‘Just exactly where are they are going to get the gas to power this monster?’ They did not like the question. And they did not have an answer,” he said.
It is going to be, he fears, a serious problem.
“A shortfall of 10 BCF a day is 10 to 12.5 percent of U.S. gas production, depending on if you count just dry gas, or dry gas-plus associated gas and plant extracts. But any way you cut it, 10 BCFG per day is a lot,” explained DeMis.
Putting the Pieces Together
There are five pieces to the puzzle right now:
• Both Barnett and Fayetteville fell by 40 percent of their top plateau in three to five years. If the Haynesville falls like the Barnett and the Fayetteville, a decline of 6 billion cubic feet of gas per day can be expected.
• Operators in Haynesville now have HBP’d (“held by production”) all of their acreage. There is no incentive for operators to, as DeMis said, “drill, baby, drill” to hold their leases.
• By mid-2024, methane prices were below $2, thereby making methane – on an inflation-adjusted basis – “the cheapest source of energy literally since the time of the Egyptian pharaohs. On a BTU basis, at $2, methane was cheaper than running oats through your oxen,” said DeMis. “This is never going to happen again.”
• Massive operator consolidation in Haynesville: “There are only a dozen operators left in the Haynesville field. What this means is that the few operators left in the field have been buying out their competition and paying a dear price for their ‘sticks on the map’ (meaning their proven locations). These operators can count their ‘sticks’ and see that their remaining ‘sticks’ are precious, so they will be reluctant to drill up their inventory without higher prices” he said.
• As mentioned, LNG capacity will expand “on a monster scale,” he added. “The latest number I saw was that we should see LNG capacity increase by about another 11 BCF of gas per day by 2028.” The United States is now the world’s largest exporter of LNG. “We have gone from less than 3 BCF of gas per day in 2018 to almost 14 BCF per day in LNG exports today, according to the EIA.”
“So if the operators are going to be reluctant to drill until prices are high, yet at the same time, politicians, pundits, LNG exporters and data centers want more gas, then obviously prices are going to go higher,” he added.
DeMis, who will be speaking on the situation in Haynesville at AAPG’s “Subsurface Energy to Power” event in Houston this month, said his message will be to explain why there will be a natural gas shortage in the Gulf Coast in three years just as data centers are ramping up power demand.