Permian Gas Prices Plummet Amid Record Production
The Permian Basin in Texas is producing more natural gas than it can sell, leading to negative prices for 118 of the first 131 trading days this year. The region's record-breaking gas production has been a challenge for producers, who are forced to pay others to take the gas off their hands. Chevron is building a power plant next to a data center campus to solve this problem, signing a 20-year agreement with Microsoft in June.
The power plant will ramp up to 2.67 gigawatts and is expected to start producing electricity by 2028. This deal shows how three separate energy problems in West Texas are starting to find the same customer. The region's oil production has been slowing down, while gas production continues to rise.
Data centers are emerging as a solution for stranded gas in the Permian Basin. One data center project near Pecos will burn gas directly on site to power its electricity needs, rather than selling it through pipelines. This approach is being adopted by other developers building behind-the-meter data centers in Texas.