Executive Summary:
Infrastructure: Chevron (CVX) plans to build its first natural gas-fired power complex for a data center in West Texas, part of a trend East Daley Analytics anticipates to take advantage of abundant Permian Basin gas.
Rigs: The US rig count remained flat for the week of Dec. 27 at 512 rigs.
Flows: US natural gas volumes in pipeline samples averaged 69.3 Bcf/d for the week ending Jan. 4, down 1.5% W-o-W.
Storage: Traders and analysts expect the EIA to report a 114 Bcf storage withdrawal for the week ending Jan. 2.
Infrastructure:
Chevron (CVX) is emerging as a player in AI power generation. The major plans to build its first natural gas-fired power complex for a colocated data center in West Texas, part of a trend East Daley Analytics anticipates to take advantage of abundant Permian Basin gas.
Chevron aims to make a final investment decision (FID) on the project by early 2026 and begin generating power in 2027, starting with 2.5 GW of capacity and possibly expanding to 5 GW for a single data-center client. The facility is designed to operate behind the meter, delivering electricity directly to the colocated data center. The project supports CVX’s transition from a conventional fuel supplier, to directly selling electrons to hyperscale consumers.
West Texas fits well in the model. CVX can supply the plant with gas from its Permian oil operations, and lean on existing G&P infrastructure to deliver fuel for baseload power. The strategy supports more reliable pricing for Permian gas supply by tying it to firm, behind-the-meter power sales.
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East Daley expects this approach to create a durable new demand wedge for Permian gas. Texas is already a growth market for data centers, and building projects directly in the Permian makes sense.
For developers, it connects projects with reliable fuel to generate power, and solves for power-grid interconnect hurdles. For producers, data centers would support a steady market for their associated gas and solve for pipeline takeaway concerns. They would also shield operators from in-basin price volatility. Waha prices have frequently traded near zero or negative in recent years when Permian gas production outruns pipeline egress.
The CVX project is one of several Permian-based data centers East Daly is following in the Data Center Demand Tracker (see map above of West Texas data center projects). Chevron has not disclosed the expected gas consumption, but a multi-gigawatt combined-cycle facility of this scale implies several hundred MMcf/d of steady in-basin gas demand. Upside would be materially higher if the project expands toward 5 GW.
CVX is also pursuing similar “power foundry” campuses with Engine No. 1 (energy-focused investment firm) and GE Vernova gas turbine and power systems provider) across the Southeast, Midwest and West, suggesting the Permian build could serve as a template for repeatable gas-to-power projects.
Bottom Line: Behind-the-meter campuses will complement the boom underway in Permian long-haul pipelines. East Daley forecasts over 10 Bcf/d of new takeaway by 2030 from greenfield projects like Blackcomb, Desert Southwest and Eiger Express. Data centers would soak up associated gas locally, creating new markets when egress is tight and supporting higher in-basin prices.
Rigs:
The US rig count remained flat for the week of Dec. 27 at 512 rigs. The Bakken (-1), Eagle Ford (-1) and Marcellus–NE PA (-1) lost rigs while the Anadarko (+1), ArkLaTex (+1), Marcellus+Utica (+1), Powder River (+1) and Uinta (+1) gained rigs W-o-W.
At the company level, XTO Energy (-3), Hess Corp. (-3), Energy Transfer (-2), EnLink (-2), Kinetik (-2), Phillips 66 (-1), Western Midstream (-1), ONEOK (-1), ExxonMobil (-1) and Aethon Energy (-1) lost rigs while Targa Resources (+3), Kinder Morgan (+3), Enterprise (+2), Salt Creek Midstream (+2), Williams (+1) and Brazos Midstream (+1) gained rigs W-o-W.
See East Daley Analytics’ weekly Rig Activity Tracker for more information on rigs by basin and company.
Flows:
US natural gas volumes in pipeline samples averaged 69.3 Bcf/d for the week ending Jan. 4, down 1.5% W-o-W.
Major gas basins declined 1.5% W-o-W to average 42.3 Bcf/d. The Haynesville sample slid 0.1% to 9.7 Bcf/d, while the Marcellus+Utica declined 2.4% to 31.8 Bcf/d. The Barnett sample jumped 23% W-o-W.
Samples in liquids-focused basins also decreased 1.5% to 19.0 Bcf/d. The Permian sample declined 1.5% to 6.2 Bcf/d, and the Eagle Ford sample increased 4.5% W-o-W.
Storage:
Traders and analysts expect the Energy Information Administration (EIA) to report a 114 Bcf storage withdrawal for the week ending Jan. 2. A 114 Bcf draw would bring storage levels to 3,261 Bcf, or 36 Bcf greater than the newly released five-year average inventory level calculated by the EIA for the 2021-25 period. The market would remain in surplus for a second straight week after briefly falling into deficit for the week ended Dec. 19. Storage is 112 Bcf lower than last year.
Mild weather to end December and start January is largely to blame for the decelerating pace of storage withdrawals vs the five-year average. In the base winter forecast in our Macro Supply & Demand Report, East Daley assumes storage levels fall to 2,300 Bcf at the end of January. However, weather forecasts for the 10- to 15-day period are mostly bearish, and point to gas-weighted heating degree days well below 10-year normal levels. If January is a dud weather-wise, we could be looking at inventory levels closer to 2,600 Bcf at the end of the month, which would be more than 100 Bcf higher than the five-year average. Prices continue to reflect this weakness, with the prompt month falling below $3.40/MMBtu this week and cash prices struggling to maintain that level.
See East Daley’s latest Macro Supply & Demand Report for more analysis on the winter market outlook.
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