Why Natural Gas is the Key to the Energy Transition
We've talked in the past about the energy transition and the important role that natural gas is going to play in it, because ultimately natural gas is the most important input into our electricity generation needs in the United States. It's upwards of 43% of our electricity generation, which is likely to increase as we continue to sunset higher carbon emitting sources like coal. And it's really a bridge to a future where we integrate wind and solar and other renewable sources, and perhaps even nuclear down the road, in terms of meeting our electricity demand needs.
It also plays on this electrification theme whereby, as our electricity demand increases, we need reliable sources of electricity. And we're seeing it play out. For example, one of the largest MLPs, an AMLP, actually struck a deal with a cloud computing company down in Texas who's building an AI data center to build a lateral pipeline to provide natural gas specific to that data center.
The idea is that data center wants to ensure that anybody who uses it, when the prompt is entered into the LLM, that they can't return some error message that says, "Actually, we don't have electricity right now, so we'll get you an answer in 48 hours whenever we have electricity." Natural gas is abundant here in the United States, it's relatively cheap, and of course it's reliable. The companies in ENFR, the companies in AMLP, are the ones that are tasked with providing the network of infrastructure that connects production in natural gas to consumption in natural gas.
Increasingly, consumption in natural gas is in the form of increasing electricity demand from these large data center projects. It's also increasingly a global story as we're increasing our export capacity for things like liquified natural gas. When we think about ENFR, 70-75% of the revenues in that portfolio are tied to natural gas servicing activities, meaning transportation, storage, processing, fractionation, liquefaction, all of the various businesses that are in the midstream category within natural gas are dominated by the companies in ENFR.
If your thought, as we talked about earlier in the conversation, is that increasing electricity demand is going to increase natural gas demand, well then these companies really sit at the heart of connecting the upstream to the downstream. The downstream is increasingly hyperscalers who are building AI data centers that are in desperate need of reliable electricity generation. We've seen adjacencies, and that's how we're positioning Midstream in some ways as an adjacency to AI, adjacency to the electrification story. Even companies like GE Vernova, which is building those gas turbines, has seen a three-year backlog in demand for those gas turbines, which are being built on these AI data centers and other facilities.
