How natural gas and LNG are powering the industries of tomorrow

Perspectives on the long-term role of natural gas in ensuring global energy security and affordability have evolved rapidly since Milan last hosted Gastech. At that time, the Ukraine crisis had just triggered a chain of disruptive events, upending decades of international energy policy. In response, governments and the energy industry demonstrated remarkable ingenuity and urgency – mobilising LNG and other solutions to keep homes warm and economies functioning.

As the industry returns to Milan, new global realities are further reshaping these perspectives. Among them is the accelerating impact of artificial intelligence, which is advancing at a breathtaking pace and promising to transform the very foundations of human civilisation. This transformation and the infrastructure supporting it is both promising and energy-intensive, placing sustained pressure on existing energy infrastructure in many regions and creating new decarbonisation challenges to solve.

Turning to gas-fired power solutions

The energy sector is rising to this challenge. Natural gas and LNG, valued for their flexibility and reliability, are increasingly viewed as essential in powering the industries of tomorrow. Sustainability and decarbonisation are important principles for the large companies leading the AI revolution. It is remarkable to report that many of the next-generation data centre campuses are turning to gas-fired power solutions to complement renewable energy, particularly when rapid grid interconnection is not viable to support the required compute buildout.

The observable changes in perspectives and policy extend beyond what is required to support the growth of the AI industry. Pipeline projects that were once stalled indefinitely are now in service, long-anticipated LNG production capacity is nearing final investment decisions, and development plans are advancing in new places, including Argentina and Guyana. Natural gas is solidifying its position as a cornerstone of the future energy system.

Even in regions once generally seen as opposed, such as British Columbia, changing attitudes are reinforcing this momentum. There, energy infrastructure projects developed in a manner respectful of communities and decarbonisation objectives are now finding greater regulatory certainty and public support. These changes are impressive, but more direct capital investment is easier to measure. Investment trends also clearly reflect a shift in thinking consistent with natural gas being more part of a long-term solution than solely a transition fuel.

Strong valuation outcomes

Natural gas infrastructure and power assets have been achieving strong valuation outcomes, demonstrating improved investor sentiment in the long-term value of these assets and helping to reignite investment interest. Many financial sponsors who had previously avoided the sector on the back of ESG concerns are now reacquainting themselves and, in some cases, actively pursuing new equity investment opportunities.

The debt markets reflect the same trend. A growing number of commercial banks are participating in LNG and gas-related infrastructure financings, including some institutions previously thought to have exited the space permanently. While not all former lenders have returned, the influx of new participants has expanded financing capacity beyond prior levels. Appetite for LNG financing transactions is strong enough to tempt sponsors and developers to push market boundaries – testing tolerance for merchant exposure and novel commercial structures. This is in addition to a crowded calendar of large-scale LNG financings putting the expanded banking pool to the test.

Opportunity for new participants

An opportunity has emerged for new participants with bank market capacity being stretched, especially from private credit. Asset managers with applicable private credit strategies have amassed substantial capital and are actively exploring deployment into midstream and LNG opportunities, increasing the liquidity available to support the sector. These players are working with advisors to develop and introduce new and innovative financing approaches tailored for capital-intensive energy infrastructure.

It may seem that political and financing market perspectives are turning a corner, but it would be unwise to take these recent developments for granted. To make these trends durable will require continuous focus on deploying solutions centered around natural gas that lead to decarbonising outcomes, safe operations, reliability, affordability, and continuous communication efforts to dispel misconceptions and ensure the public and policymakers are aware of the contributions to progress and prosperity being made by this industry.