Chevron Corp. chose West Texas as the site of its first project to power a data center with natural gas, marking the start of a new line of business for the oil giant to capitalize on the boom in artificial intelligence.
According to a statement and presentation released ahead of Chevron’s investor day on Wednesday, the company is in exclusive discussions with the data center’s end user, which has not been named, and is expected to make a final investment decision early next year. The facility is expected to be operational in 2027, and will have the capacity to generate 5,000 megawatts in the future.
Big Oil is looking to reduce the enormous energy demand that would be needed to power data centers, which are located farther from major population centers and closer to fuel sources. Chevron is one of the largest producers in the Permian Basin of West Texas, having identified so much natural gas that it often overwhelms pipelines and has to be flared.
“We have gas,” Chief Financial Officer Eimear Bonner said in an interview ahead of Chevron’s investor presentation in New York on Wednesday. “We are uniquely positioned to have a very competitive project.”
The power project is expected to grow by its third year to generate about 2,500 megawatts, equivalent to two nuclear reactors. It will be built separately from the grid to avoid competing with the power supply for the wider population. Chevron sees an opportunity to secure 3 billion cubic feet per day of natural gas production.
Stocks in New York were down 1.7 percent by 10 a.m., with Brent crude down 2.7 percent at $63.41 a barrel.
Key to Chevron’s venture into AI was a partnership with Engine No. 1, the investor behind a successful activist campaign in 2021 against arch-rival ExxonMobil Corp. An order for seven large natural gas turbines was obtained from G. Vernova Inc. in cooperation with Engine No. 1.
Chevron executives will explain their power strategy in more detail at the Houston-based company’s first investor day in nearly three years. It said the energy giant expects to increase production through 2030 even while reducing capital spending, which would increase free cash flow by 14 percent annually over the next five years.
The company expects to buy between $10 billion and $20 billion of stock annually through 2030 at an average price of $60 to $80 per barrel of Brent crude. It did not change its current share purchases, which were $2.6 billion in the last quarter, which is the low end of the range.
“You can count on us to be prepared for the unexpected, and resilient through any headwinds,” Chief Executive Officer Mike Worth said in prepared remarks.
New long-term goals include:
- The annual capital budget is reduced from $18 billion to $19 billion to $22 billion by 2030.
- Chevron expects to generate nearly $30 billion in free cash flow by 2030, up 75 percent from current levels, at 70-a-barrel Brent.
- Generating enough cash to cover its profits and capital costs with Brent at $50 a barrel
- Annual oil and gas production has increased by 2% to 3%
- Analysts at JPMorgan Chase & Co. had expected an annual increase of about 1.7 percent
- Increasing annual cost savings to $4 billion by the end of 2026, up from $3 billion previously
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