Key Points
- Chevron is launching its first project to provide natural gas-fired power directly to an AI data center in West Texas.
- The project leverages Chevron’s abundant natural gas supply in the Permian Basin to meet the high energy demands of AI.
- The facility is expected to be operational in 2027 and will eventually have a capacity of up to 5,000 megawatts.
- The move is part of Chevron’s broader strategy to grow production and increase free cash flow while managing capital spending.
Chevron is stepping into a new line of business, announcing that it will build its first project to provide natural gas-fired power directly to a data center. The oil giant is choosing West Texas for this venture, aiming to cash in on the booming demand for energy to power artificial intelligence.
The company is currently in exclusive talks with the data center’s end user, which it did not name. Chevron expects to make a final investment decision early next year, with the facility planned to be operational in 2027. It will eventually have the capacity to generate up to 5,000 megawatts of power.
This move is part of a larger trend in which “Big Oil” is seeking to meet the enormous energy needs of data centers, which are increasingly being built closer to fuel sources rather than in major cities. Chevron is one of the largest producers in the Permian Basin of West Texas, an area that produces so much natural gas that it often has to be burned off.
“We’ve got the gas,” said Chief Financial Officer Eimear Bonner. “We are uniquely positioned to have a very competitive project.”
The power project is expected to ramp up to about 2,500 megawatts in its third year, which is more power than two nuclear reactors. It will likely be built off the main grid to avoid competing with the public electricity supply.
A partnership helped Chevron enter the AI power business with Engine No. 1, the same investor that successfully challenged its rival, Exxon Mobil, in 2021. This collaboration helped secure an order for seven large natural gas turbines from GE Vernova Inc.
At its investor day on Wednesday, Chevron also announced plans to grow its oil and gas production through 2030 while reducing capital spending. The company expects this strategy to increase its free cash flow by 14% annually over the next five years.
