John Chew

Matthew Smith has spent the last 18 months modeling every well, pipeline, storage facility, and power plant in the American natural gas system. His conclusion is that the US is heading toward a natural gas shortage with no precedent, beginning in 2028. By 2030, he believes we could exhaust our working natural gas storage entirely. The fuel everyone in AI is counting on, and that everyone assumes is abundant, is not there. And because gas sets the price of electricity in most of the country, he argues Americans will pay for the shortage in their power bills. Matthew has worked in energy markets for over 20 years and is the CIO of Chronometer Partners. This is his second time on the show, and he's one of my favorite people to talk to about energy. We discuss: - Why the bottleneck is moving from power to fuel - Why we can't just shut off exports - 2028 as the inflection point - Large-scale nuclear v. SMRs - Who wins, who loses, and what can still be done Enjoy! TIMESTAMPS 0:00 Intro 1:30 What Drives the Deficit 11:00 Why Supply Can’t Catch Up 20:35 The 2030 Gas Crisis 25:05 Winners and Losers 29:00 Nuclear and Solar 33:30 Consumers Pay the Bill 37:20 AI’s Next Shortage 45:25 Solutions and Global Stakes 51:15 The Coming Gas Knife Fight

As part of Matthew's letter (which I recommend reading in its entirety) he includes an appendix of expected pushback. It lays out the objections and his responses across available gas resource, midstream, power, and LNG. On available gas resource: "Technical gas-in-place and 'recoverable resource' do not mean the gas is economic or will ever be produced. The industry has tested 500-600-ft spacing and single wells were materially less productive due to well cannibalization. Child wells are significantly less productive than the parent wells and therefore far less capital efficient. Much higher prices are required to drill infill wells in the Marcellus. The same is true in Haynesville. Significant infrastructure will also be required. It is currently not contemplated." On midstream: "It takes years to build new gathering systems, processing, pipeline and other infrastructure, and if it is to be built to solve the acute tightening in 2028, the market would already be aware of the projects." On power: "We are modeling natural gas from the wellhead, and whether it is behind-the-meter or grid connected, it is consuming natural gas. All incremental natural gas power generation contributes to the natural gas deficit beyond 2027. Any behind-the-meter projects pull forward the natural gas tightness we foresee." On LNG: "U.S. LNG exports will make up approximately one-third of global LNG supply by 2030. The majority of the 35 Bcf per day of approved LNG nameplate capacity is either contracted or likely to be contracted to global counterparties, including foreign utilities. LNG contracts are generally long-lived, volumes are predetermined, and the contract terms are used to finance the LNG projects. Unwinding these commitments is a complicated and expensive proposition."

Matthew Smith has spent the last 18 months modeling every well, pipeline, storage facility, and power plant in the American natural gas system. His conclusion is that the US is heading toward a natural gas shortage with no precedent, beginning in 2028. By 2030, he believes we could exhaust our working natural gas storage entirely. The fuel everyone in AI is counting on, and that everyone assumes is abundant, is not there. And because gas sets the price of electricity in most of the country, he argues Americans will pay for the shortage in their power bills. Matthew has worked in energy markets for over 20 years and is the CIO of Chronometer Partners. This is his second time on the show, and he's one of my favorite people to talk to about energy. We discuss: - Why the bottleneck is moving from power to fuel - Why we can't just shut off exports - 2028 as the inflection point - Large-scale nuclear v. SMRs - Who wins, who loses, and what can still be done Enjoy! TIMESTAMPS 0:00 Intro 1:30 What Drives the Deficit 11:00 Why Supply Can’t Catch Up 20:35 The 2030 Gas Crisis 25:05 Winners and Losers 29:00 Nuclear and Solar 33:30 Consumers Pay the Bill 37:20 AI’s Next Shortage 45:25 Solutions and Global Stakes 51:15 The Coming Gas Knife Fight

Matthew Smith has spent the last 18 months modeling every well, pipeline, storage facility, and power plant in the American natural gas system. His conclusion is that the US is heading toward a natural gas shortage with no precedent, beginning in 2028. By 2030, he believes we could exhaust our working natural gas storage entirely. The fuel everyone in AI is counting on, and that everyone assumes is abundant, is not there. And because gas sets the price of electricity in most of the country, he argues Americans will pay for the shortage in their power bills. Matthew has worked in energy markets for over 20 years and is the CIO of Chronometer Partners. This is his second time on the show, and he's one of my favorite people to talk to about energy. We discuss: - Why the bottleneck is moving from power to fuel - Why we can't just shut off exports - 2028 as the inflection point - Large-scale nuclear v. SMRs - Who wins, who loses, and what can still be done Enjoy! TIMESTAMPS 0:00 Intro 1:30 What Drives the Deficit 11:00 Why Supply Can’t Catch Up 20:35 The 2030 Gas Crisis 25:05 Winners and Losers 29:00 Nuclear and Solar 33:30 Consumers Pay the Bill 37:20 AI’s Next Shortage 45:25 Solutions and Global Stakes 51:15 The Coming Gas Knife Fight

"The fuel everyone thinks is abundant is not." Matthew's letter shows storage capacity grew 7% since 2010 while demand grew 54%, with another 39% coming by 2030. He forecasts an unprecedented gas shortage starting in 2028, and explains why the market won't see it coming: "Natural gas is well supplied today, '26 and '27, and the result is that nobody is investing in gas. EQT is shutting in natural gas right now because they think it'll be more valuable later. The things that we can see real time to figure out if the market is onto this tightness — no one's onto it. It's perpetuating this view that most Americans have, which is there's plenty of natural gas, because for 15 years it's all we've been told. There's a complacency that's developed, and we think that complacency is gonna take us right up to the point where it's too late. Gas has lulled everybody to sleep. In '28, the curve is flat because people believe the gas is abundant. That's despite all these AI compute announcements. We start to draw meaningfully in the middle of '28 on the gas system like we've never drawn before. By 2029, we drop below all known historical storage evidence. Prices have gone to $6 or $8 or $10, but those have been transitory. What we're talking about are structural drivers of demand against a known possible production of gas, and they don't match up. The deficit gets really convex and unbounded."

Matthew on how energy goes from 10% of the cost of compute today to 20 or 30% by 2029. From our conversation and his letter: "The cost of power will be much higher than the hyperscalers underwrote, given their reliance on natural gas-fueled generation priced off a fuel that will cost far more than they assumed. High-cost fuel cells, behind-the-meter generation, bring-your-own-gen projects, emergency power procurement auctions. Virtually every solution being pursued by AI compute requires more natural gas. Each one accelerates our thesis. If you plug in all of this compute and it's gas powered, and we think gas could double or triple structurally even without weather, it could end up being 20 or 30% of the cost of compute by 2029. One of your recent guests listened and he said, 'Well, this sounds like DRAM two years ago.' Slowly at first, and then all at once."

I know we are only halfway through the year, but I feel it will be hard to top this comment from one of the obligatory buy recommendations on $SPCX issued by one of the underwriters this week. It is truly glorious.