Drawn by cheap land and abundant natural gas, the Permian Basin has become a hotbed of data center development. The trend looks to change market dynamics in the basin, soaking up some growth in gas production just as new pipelines enter service.
In the ‘Data Centers’ dashboard in Energy Data Studio, East Daley Analytics is currently monitoring 25 proposed data center projects located within the Permian in West Texas and southeastern New Mexico (see map). They include Chevron’s (CVX) West Texas AI project with Microsoft (MSFT), and Meta’s new venture with Blackrock near El Paso.
In a high case, the 25 projects could add up to 40 GW of electric generation capacity and create up to 6.4 Bcf/d of new natural gas demand, depending on competition from other generation sources like wind, solar and battery storage.
In our gas demand forecast, we adjust seasonally for the historical share of gas-fired generation in Texas and New Mexico. The 100% gas equivalent scenario assumes that gas is used to generate all the electricity for the announced data centers.
To arrive at a final forecast for the Macro Supply & Demand report, we weigh the likelihood of these projects moving forward and entering service. East Daley currently expects over 600 MMcf/d of new in-basin demand to emerge from data centers by YE30 (see figure below).
Texas’ recent permitting freeze on data-center grid interconnects does introduce uncertainty in the gas demand outlook. However, we view this as more a long-term concern; the projects in our outlook through 2030 already have permits, and nearly all are currently under construction. We will take a deeper look at the impacts of the state’s permitting freeze in a later post.
Projects Tilt Field Toward Producers
New data-center gas demand will be a factor clearing Permian gas prices, since volumes consumed near the field do not need to move on egress pipelines.
The 570 MMcf/d Gulf Coast Express expansion and Hugh Brinson startup have already lifted Permian spot prices this summer. With more pipelines under construction (Blackcomb, Eiger Express), plus the newly announced Solitude project, local demand for data centers will further loosen the Permian market balance.
The dynamic will support Waha prices outright by soaking up some gas supply, creating more competition with shippers moving volumes to the Gulf Coast. It will also give Permian producers more leverage in negotiations with pipelines for expiring shipper contracts.
Like CVX’s venture with Microsoft, this is a good opportunity for Permian producers to gain a dedicated buyer for their associated gas closer to the wellhead. Avoiding transport tariffs and fuel-loss charges should makes these project more competitive than moving gas out of the basin on long-haul pipelines. – Alec Gravelle Tickers: CVX, MSFT.
One Market, One Model: Gain a Holistic View of North America Supply & Demand
East Daley Analytics is pleased to announce the Canada Supply & Demand report. The Canada S&D completes our North American model, providing a fully integrated supply and demand forecast for crude oil and natural gas. East Daley follows molecules from Canadian production through US infrastructure to end-markets. Clients now have a continental view to anticipate trends, from how Canadian gas is reshaping Midwest markets, to how crude imports flow to Gulf Coast refiners. The Canada S&D report and dataset is available exclusively in Energy Data Studio. Reach out to learn more about East Daley’s North American energy model.
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