WEBVTT - Quantum Capital Group CEO Talks AI Fueling Energy Demand

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Let's talk about the rise of AI fueling energy demand.

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<v Speaker 2>Golment Sax estimating US data centers will use eight percent

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<v Speaker 2>of total power in a country by twenty thirty, or

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<v Speaker 2>three times the level from twenty twenty two. Will Van

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<v Speaker 2>Low is the CEO of Quantum Capital Group, one of

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<v Speaker 2>the largest private capital providers to the global energy industry,

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<v Speaker 2>and will join us now.

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<v Speaker 1>Well, good morning, good morning.

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<v Speaker 2>It's good to see you, sir. The incoming president wants

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<v Speaker 2>to unlock energy in America. Drill Baby, drill is something

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<v Speaker 2>we heard from him repeatedly on the campaign trail. How

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<v Speaker 2>difficult is that actually going to be?

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<v Speaker 3>Well, first of all, thank you for having me on

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<v Speaker 3>this morning. It's going to be very difficult. In terms

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<v Speaker 3>of oil and gas production. Oil in particular, we have

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<v Speaker 3>really developed most of the resource, the shell resource plays

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<v Speaker 3>and other than the Permian, they're all either peaking and

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<v Speaker 3>rolling into decline or they will soon. And I think

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<v Speaker 3>the Permian maybe we can get another million or two

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<v Speaker 3>million barrels a day out of it. So we produce

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<v Speaker 3>about thirteen and a half million barrels a day right now,

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<v Speaker 3>so maybe gets up to fourteen and a half or

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<v Speaker 3>fifteen and a half, But that would really be the

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<v Speaker 3>physical limitations of the permit.

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<v Speaker 1>Given the fact that there seems to be a long

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<v Speaker 1>runway for anything in terms of infrastructure in the energy space,

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<v Speaker 1>what could changes in the Trump policies next year actually

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<v Speaker 1>do fundamentally to shift the investing landscape, to shift sort

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<v Speaker 1>of the energy landscape from your perspective.

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<v Speaker 3>Right, Well, I think the biggest thing is lifting this

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<v Speaker 3>LNG pause they've got to put on last year. You know,

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<v Speaker 3>there were tens of billions of dollars of investment that

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<v Speaker 3>were slated to go into the next phase of LNG

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<v Speaker 3>build out. That's critical for our allies, that's critical for

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<v Speaker 3>America projecting its power throughout the world to be able

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<v Speaker 3>to export that energy. So I think that's the biggest

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<v Speaker 3>thing that he could do immediately, and he said, you know,

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<v Speaker 3>first day in office that something very likely may do.

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<v Speaker 3>But I think other than that, permitting reform is the

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<v Speaker 3>biggest thing that we really need. And that's not only

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<v Speaker 3>for oil and gas, but that's also forransmission. I mean,

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<v Speaker 3>that's the big is the wind and solar build out continues.

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<v Speaker 3>The biggest bottle Nike is transmission. So I think having

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<v Speaker 3>having regulatory kind of relief in terms of how long

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<v Speaker 3>it takes to get these power lines permitted, permitting midstream

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<v Speaker 3>pipelines so we can get that gas. America has a

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<v Speaker 3>lot of natural gas. We have a lot more natural

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<v Speaker 3>gas than we do oil, and so we've got to

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<v Speaker 3>be able to build the critical infrastructure to get that

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<v Speaker 3>power and that gas around the country.

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<v Speaker 1>What's been fascinating to so many people is that there

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<v Speaker 1>is a dissonance right now to all the discussions around

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<v Speaker 1>artificial intelligence and the energy that's required to power that,

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<v Speaker 1>and then just how long the process is to build

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<v Speaker 1>it out from an infrastructure process, and then the fact

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<v Speaker 1>that policies tend to ping pong and they change change

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<v Speaker 1>quite considerably. How do you get around that when you're

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<v Speaker 1>investing to try to cater to what seems like a

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<v Speaker 1>really big opportunity but has these major pitfalls.

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<v Speaker 3>Yeah, I mean, look, it's it's AI. A typical AI query,

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<v Speaker 3>generative AI query takes ten times the amount of power

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<v Speaker 3>that are regular Google search takes. Right, and so when

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<v Speaker 3>you look at you mentioned that that power demand will

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<v Speaker 3>literally triple for a data centers over the next kind

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<v Speaker 3>of five to six years, that's a massive amount of power.

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<v Speaker 3>You know, a data center, say a one gigawatt gas

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<v Speaker 3>turbine that fires a data center could power eight hundred

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<v Speaker 3>thousand homes. So you think about that a data center

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<v Speaker 3>demand for power is going to grow about fifty about

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<v Speaker 3>fifty gigawatts over the next six years. That's enough power

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<v Speaker 3>we're going to have to install, enough power to power

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<v Speaker 3>forty million homes. That's a lot of power. Well.

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<v Speaker 4>Absolutely, when John sort off the conversation, they're talking about drill, baby, drill,

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<v Speaker 4>I can't help but think that President Trump was elected,

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<v Speaker 4>and then a few weeks later, Chevron is saying, actually,

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<v Speaker 4>we're going to pull back on the Permian. Do you

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<v Speaker 4>see more US oil producers pulling back on drilling because

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<v Speaker 4>actually the oil right now price point is just not adventageous,

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<v Speaker 4>that's correct.

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<v Speaker 3>So you look at where prices are today, the inventory

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<v Speaker 3>that's left, it's economic at these levels. And that's why

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<v Speaker 3>I say that you've got to be very careful projecting

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<v Speaker 3>how much production US can actually grow. And so at

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<v Speaker 3>these prices, no, I don't see anybody drilling more.

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<v Speaker 4>Do you think then the Trump administration would be more

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<v Speaker 4>willing to either accept what the buy An administration might

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<v Speaker 4>do on their way out, or do it themselves, which

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<v Speaker 4>is to maybe start to hold back on Russian oil,

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<v Speaker 4>saying instead of this price cap, we're actually going to

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<v Speaker 4>sanction oil outright, really hurt putin. At the same time,

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<v Speaker 4>if the prices go up, that actually might be better

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<v Speaker 4>for US drillers.

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<v Speaker 3>Yeah, I mean it's difficult. I mean we had there

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<v Speaker 3>has been sanctions in place, arguably not very good ones,

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<v Speaker 3>and so I do think that's clearly it's been rumored

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<v Speaker 3>to be talked about. How effect will be, I don't know,

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<v Speaker 3>but I will say I do think that President Trump

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<v Speaker 3>is very focused on keeping energy prices low for the

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<v Speaker 3>American consumer, and sanctioning Russian oil would would have just

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<v Speaker 3>the opposite effect of that.

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<v Speaker 4>The other thing you mentioned, of course, is gas and

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<v Speaker 4>how the US has so much natural gas And do

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<v Speaker 4>you think we're going to see executive orders when it

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<v Speaker 4>comes to these LNG permits. Do you see deals growing,

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<v Speaker 4>say for the United States and Europe because they're looking

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<v Speaker 4>for some sort of bipartisan wedge into acquiescing themselves to

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<v Speaker 4>the Trump administration.

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<v Speaker 3>Well, Europe is still buying a lot of gas from Russia.

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<v Speaker 3>It's not talked about very much, but they have to, okay,

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<v Speaker 3>And so that's absolutely why we need American LNG to

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<v Speaker 3>be expanded significantly. We have the gas to supply to

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<v Speaker 3>our allies in Europe, and so you know, I think

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<v Speaker 3>that's going to be a very critical part of Trump's

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<v Speaker 3>energy policy, and it's something that really needs to happen.

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<v Speaker 1>In the meantime, given that all these policies are sort

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<v Speaker 1>of question marks right now, how much are you going

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<v Speaker 1>to the share thing, which is tech companies themselves and

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<v Speaker 1>working directly with them in order to build out energy

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<v Speaker 1>because they need it and they need some certainty and

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<v Speaker 1>you can probably provide that with the pool of capital

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<v Speaker 1>that you have.

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<v Speaker 3>Yes, So I think a couple of things are going

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<v Speaker 3>to happen. The problem with all the growth an AI

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<v Speaker 3>demand for electricity is it takes still takes four to

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<v Speaker 3>five years to go get a new gas fired power

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<v Speaker 3>plant built, and so we have to look at the

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<v Speaker 3>existing asset base in the US today. If you look

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<v Speaker 3>at the roughly two hundred gas turbines that are installed

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<v Speaker 3>generating power that are greater than five hundred megawats, those

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<v Speaker 3>run at about a fifty five to fifty six percent

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<v Speaker 3>capacity factor. Okay, so there's a lot of capacity left

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<v Speaker 3>in existing assets. It's just are the regulators going to

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<v Speaker 3>allow the tech companies to take that excess power because

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<v Speaker 3>that excess power is needed whenever it gets really cold

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<v Speaker 3>or it gets really hot and demand surges, And that's

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<v Speaker 3>going to be the real kind of tug and pull

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<v Speaker 3>is we have it. It's going to take a lot

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<v Speaker 3>longer to build out the new power plants. But what's

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<v Speaker 3>going to how is that going to play out between

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<v Speaker 3>the consumer on one hand and the tech companies on

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<v Speaker 3>the other hand in five to ten years.

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<v Speaker 1>How different is the backdrop going to look for big

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<v Speaker 1>energy in the United States at a time where big

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<v Speaker 1>oil has been sort of self constraint in a number

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<v Speaker 1>of different ways from their investing programs, and you have

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<v Speaker 1>upstarts like not only yourself, but a whole host of

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<v Speaker 1>private investors who are trying to really get in alongside

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<v Speaker 1>a big tech Yeah.

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<v Speaker 3>So I think there's a lot of capital that's been formed.

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<v Speaker 3>You've heard about these huge partnerships over the last couple

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<v Speaker 3>of months that are all kind of around data centers

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<v Speaker 3>and supplying that power for data centers. If you think

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<v Speaker 3>about it. If you spend a billion dollars on power

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<v Speaker 3>for a data center, you're going to spend about ten

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<v Speaker 3>billion dollars on a data center itself, another twenty billion

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<v Speaker 3>dollars on chips. So the power component's only about three

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<v Speaker 3>little over three percent of the total cost of a

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<v Speaker 3>data center. So I think there's going to be clearly

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<v Speaker 3>the big tech companies are going to have to partner

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<v Speaker 3>with both private and public companies to get that power.

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<v Speaker 3>But the truth is is most of the power is

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<v Speaker 3>controlled by big utilities, regulated utilities, and so I do

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<v Speaker 3>think you'll see a lot more private companies coming into

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<v Speaker 3>that space to partner with the big tech companies.

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<v Speaker 2>Americans doll not want European nay crisis, that's for sure.

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<v Speaker 2>I'm wondering how much pressure that we'll be on and

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<v Speaker 2>provide us to make coal great again. How pragmatic do

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<v Speaker 2>you think politicians leaders in America are going to be

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<v Speaker 2>on that issue.

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<v Speaker 3>Well, you know, if you look at it, the United States,

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<v Speaker 3>we have retired a lot of our coal plants over

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<v Speaker 3>the last couple of decades. Europe's retired even more. Just

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<v Speaker 3>a few months ago, the UK retired their last remaining

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<v Speaker 3>coal plant, which is an extraordinary statistic. I've had over

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<v Speaker 3>one hundred and fifty years.

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<v Speaker 2>It's amazing, and I see the government leaders celebrate it

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<v Speaker 2>all the time, and then my mum calls mad. It

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<v Speaker 2>tells me what an electricity bill was. That's right, what

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<v Speaker 2>a field bill was. And it's astronomical.

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<v Speaker 3>And what you appreciate is in every other part of

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<v Speaker 3>the world, China uses more coal than ever. We use

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<v Speaker 3>more coal today in the world we've ever used before,

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<v Speaker 3>despite all the drum beat about how we massively reduced

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<v Speaker 3>the reliance on it we have in the West, the

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<v Speaker 3>rest of the world, India, China, you know, it's it's exploding,

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<v Speaker 3>and so that's it's not really doesn't matter where it's

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<v Speaker 3>burned one atmosphere, right, And that's the other thing we

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<v Speaker 3>have to appreciate. So coal use is going to continue

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<v Speaker 3>to go up. I don't think it will necessarily in

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<v Speaker 3>the US. It will in Europe whenever they get really

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<v Speaker 3>cold or really hot and that's the only fuel they have.

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<v Speaker 3>But in Asia in particular, you're going to continue to

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<v Speaker 3>see massive use of coal. Why because that's the fuel

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<v Speaker 3>that they actually have. It's about energy security, and that

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<v Speaker 3>China uses evs, not because they love the environment, but

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<v Speaker 3>because they can burn coal to power those evs and

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<v Speaker 3>not have to import gasoline.

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<v Speaker 2>Amazing. Well it's going to see you always will. Van Low,

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<v Speaker 2>have quant some capital, Grape and Mason of coled so

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<v Speaker 2>oh the wrong reasons