AI data centers, EU methane regulation, and the future of U.S. differentiated natural gas

Growing Demand

Hyperscale data centers designed to run AI models are developing rapidly, building unprecedented gigawatt scale facilities across the world, including the US. Forecasts on the electricity demand of US centers vary but could amount to approximately 320 – 520 TWh by 2030 and 400 – 660 TWh by 2035 [1]. Assuming current US electricity demand grows at the EIA assumed rate of 1.7%[2], this equates to approximately 8 – 13% of total US electricity demand being consumed by data centers in 2035.

This massive incremental energy demand is naturally raising the question: “Where will this energy come from?”

The natural gas industry is paying attention to this coming boom, with several operators already working with AI data center operators to advance infrastructure and supply natural gas. The nonprofit research organization Global Energy Monitor tracks power plant development and found that in-development gas-fired power plant capacity in the US nearly tripled in 2025, with more than a third of this new capacity planned for on-site power for data centers [3].

Data centers are looking at natural gas “molecules” as a reliable alternative to direct “electrons” from the grid, which is struggling to keep up with demand. If powered entirely by natural gas, the projected 400 to 660 TWh requirement could equate to a consumption of approximately 8.3 to 13.7 bcf (billion cubic feet) of natural gas a day, a significant addition (7-12%) of the existing 118.5 bcf per day produced in 2025 [4]. However, natural gas producers face challenges in figuring out how to deliver gas to data centers within their existing footprint and meet the demand timelines. The backlog of orders for gas turbines and transformers is long, and new pipelines or transmission hookups take time.

At the same time, the European Union continues to import massive volumes of natural gas. The US as a major exporter of LNG, with current capacity >15 Bcf/d, exported ~7 Bcf/d to the EU in 2025 [5]. Nearly 50% of EU LNG imports were from the US in 2025 [6], and this is only expected to increase after the EU’s commitment to purchase $750 billion in energy from the US [7]. However, recent supply shifts have emerged as the global market handles liquefied natural gas (LNG) supply shock driven by war in the Middle East and effective closure of the Strait of Hormuz, taking ~20% of global LNG supply off the market [8]. Three months later some tankers are beginning to move through the Strait again, but returning to “business as usual” remains uncertain [9]. The EU has imported record high Russian LNG in the first quarter of 2026, in contrast to the EU stepwise ban on Russian natural gas which will be in full effect by the end of 2027 [10]. With Qatari supply uncertainty and the looming ban on Russian gas, the EU will likely look to US LNG as a secure and flexible source of supply.

Together, the US AI data center energy demand and the US LNG to EU export volumes could exceed 20 Bcf/d of natural gas.

A Paradigm Shift in Emissions Accounting

Securing on-site energy supply from natural gas introduces a fundamental shift in how data center operators will need to think about their emissions. Traditional data centers powered via grid electricity have thought of their GHG emissions from their energy supply in terms of Scope 2 and Scope 3, which are indirect contributions to the overall GHG profile. However, by bringing power generation on-site, there will be a massive shift to their emissions profile, bringing the lion’s share of their emissions into the Scope 1 category. Most companies are expected to apply some controls to Scope 1 emissions, which are under their direct control. Many of the companies behind the largest data centers also have net-zero GHG emission commitments to meet. To reduce offset liabilities to reach net-zero operations, AI data center operators are likely to consider certified low-emission natural gas as part of their mitigation strategy. This will force a focus on the upstream supply chain emissions associated with natural gas, especially where the data center operator has entered into a direct supply deal with the natural gas producer.

We’ve learned from a decade of research of oil and gas GHG emissions that traditional emission factors do not produce comprehensive and accurate inventories. Traditional bottom-up factors tend to underestimate emissions, but at the same time regional snapshot measurements may not capture the emissions reduction work that many individual operators are investing in. There is a prime opportunity for the natural gas industry to work with their large-scale end-use customers, like AI data centers, to demonstrate an accurate low-emission natural gas supply. And further, given the cost of emission offsets, the data center operators may be able to offer a premium for certified low-emission natural gas, unlocking for the first time in the US a differentiated gas market [12].

Domestic buyers are not the only customers paying attention to the GHG emissions from natural gas production. The EU has implemented a Methane Regulation that places strict measurement, reporting and verification (MRV) requirements on imported oil and gas, leading up to a maximum methane intensity threshold starting in 2030. This is a first-of-its kind regulation, placing emission standards on operations outside of its borders. EU LNG importers, with no direct operational control over the production of natural gas in countries like the US, will need to demonstrate the natural gas they import was subject to MRV standards equivalent to OGMP 2.0 or those set out under Article 12 of the Regulation. EU Importers will be searching for MRV-compliant natural gas, or risk penalties up to 20% of annual turnover [13].

The US, with its large volumes of natural gas produced under voluntary programs like OGMP 2.0, and with a more extensive history of emission measurement versus other worldwide supply chains, is well-suited to meet the requirements of the EU regulation, though there remains substantial uncertainty in the implementation plan for complex supply chains (like the US) and how operators will achieve a reasonable level of assurance. Whether a book-and-claim or trace-and-claim system is selected, the risk of penalty (if implemented) sets a ceiling for a premium on low emission natural gas assured to a reasonable level, particularly once the EU sets the methane intensity requirements.

The Bigger Picture

Taking a step back, it is important to recognize that most oil and gas-focused GHG emission reporting frameworks do not report on the full GHG intensity of the natural gas and LNG supply chain. While the EU MR is focused on methane emissions only from the production segment, data centers looking to reduce Scope 1 through 3 emissions may consider a more holistic, life cycle-style approach to the GHG emissions associated with natural gas supply. Life cycle assessments are critical to ensure supply-chain sourcing decisions lead to net reductions in environmental impacts. Low emission natural gas production alone does not ensure an overall low emission supply chain—especially over long transport distances [14].

But robust accounting is necessary. Critically, there is no central registry for differentiated natural gas that accounts for emissions across the supply chain and includes all relevant GHG emission species. Until a cross-industry, product-focused emissions accounting framework is implemented, the differentiated gas market will struggle to take off. While “multiple sets of books” for emissions accounting has become the norm for natural gas operators, it introduces risk and muddies the waters when linking market transactions with an emissions-differentiated product. Robust independent verification will also be key to instilling confidence in buyers, such as AI data centers, looking to make carbon-informed business decisions.

References

[1] https://www.rystadenergy.com/insights/data-centers-reshape-us-power-sector

[2] https://www.eia.gov/todayinenergy/detail.php?id=65264

[3] Page not found | Global Energy Monitor

[4] U.S. natural gas production reached a new record in 2025 - U.S. Energy Information Administration (EIA)

[5] 6.6 Bcf/d for strictly EU, 7.4 Bcf/d if UK is included, Natural Gas Imports and Exports Monthly 2025 | Department of Energy

[6] European LNG Tracker | IEEFA

[7] US LNG producers climb as EU agrees to $750 billion in energy purchases | Reuters

[8] How the Strait of Hormuz closure affects global oil supply

[9] Strait of Hormuz Reopening? Limited Oil and LNG Tanker Traffic Resumes Through Key Gulf Chokepoint

[10] EU Imports of Yamal Gas Hit Record Ahead of Ban on Russian LNG | OilPrice.com

[11] Request for Proposals: Addressing Upstream Natural Gas Emissions - Meta Sustainability

[12] Note: differentiated gas market is used here to indicate a premium or other derived benefit from offering a verified lower emission product. This may be realized as part of an unbundled market – whereby purchasers of natural gas separate the procurement of environmental attributes from their procurement of physical molecules, and not necessarily create a true separate physical commodity.

[13] Note: the EU is considering penalty exemptions to avoid security of supply risks on a case by case basis: EU floats making it easy for oil companies to break methane rules – POLITICO

[14] Gas Pathing: Improved Greenhouse Gas Emission Estimates of Liquefied Natural Gas Exports through Enhanced Supply Chain Resolution | ACS Sustainable Chemistry & Engineering