Chevron (NYSE: CVX) holds a treasure trove of low-cost natural gas resources across the U.S. This lower-carbon fuel could play a significant role in powering the artificial intelligence (AI) revolution. That technology requires a tremendous amount of electricity to power the specialized chips needed to run AI applications in data centers.
The energy company is taking a major step to capitalize on this opportunity. It's partnering with a leading investment firm (Engine No. 1) and GE Vernova (NYSE: GEV) to provide natural gas power solutions to U.S. data centers.
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A gas giant
Chevron is a major U.S. natural gas producer. The energy giant produced nearly 2.7 billion cubic feet of natural gas per day (Bcf/d) during the third quarter of last year. That's a significant increase from 2023's level when its average output through the first nine months was less than 2 Bcf/d. While it trails industry leader Expand Energy's more than 6.1 Bcf/d in production, Chevron is one of the top gas producers in the country.
One factor fueling the recent surge in Chevron's gas output was its 2023 acquisition of PDC Energy. That deal bulked up Chevron's position in the gas-rich DJ Basin of Colorado. Chevron has also been growing its associated gas output in places like the Permian Basin and the Gulf of America.
Chevron wants to get the most out of its vast natural gas resources. That's leading the energy giant to seek opportunities to supply gas to help power energy-hungry AI data centers.
Powering data centers
Chevron is teaming up with investment firm Engine No. 1 to build a new company to develop scalable, reliable natural gas power solutions for U.S. data centers. They're seeking to capitalize on the Trump administration's desire to leverage the country's abundant energy resources to turn the U.S. into an AI powerhouse. The administration recently unveiled a plan by several private sector companies to invest up to $500 billion into AI infrastructure, including building 20 data centers. Natural gas could play a key role in supporting these and other data centers because these massive facilities will consume a lot of power.
Engine No. 1 and Chevron are also partnering with GE Vernova in their joint development initiative. They aim to establish the first multigigawatt-scale, co-located power plant and data center during President Trump's second term in office. The companies aim to develop "power foundries" built on U.S.-made GE Vernova 7HA natural gas turbines. They expect to build these projects next to data centers across the U.S. Southeast, Midwest, and West regions. The power produced by these gas turbines will initially flow directly into the data centers, not the power grid, which reduces the risk of rising power prices for the data center customers.
The partners intend to initially deliver up to four gigawatts of power for AI data centers. For perspective, that's enough to provide for the energy needs of 3 million to 3.5 million U.S. homes for a year. They initially plan to develop this capacity by the end of 2027, with the potential to expand the partnership in the future. They plan to design these projects with the flexibility to integrate lower-carbon solutions to reduce their carbon footprint, like carbon capture and storage and renewable energy.
Their strategy aims to create a scalable solution that the partners can deploy to help support the rapid growth in digital technology without burdening the country's existing power grid. In the future, this innovative model could eventually supply electricity to the U.S. power grid to support the energy needs of the broader economy while keeping power costs low.
A potential accelerant
Chevron is leveraging its natural gas resources and expertise to help solve a key issue for data centers by providing them with more low-cost power. The company's partnership with Engine No. 1 and GE Vernova could enable the country to tap into its vast energy resources to unleash the power of AI. It could help accelerate the energy giant's growth in the coming years, making it an interesting partnership to monitor.
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Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
