West Texas Gas Bottleneck Threatens AI Data Center Expansion
West Texas is rich in natural gas but lacks the infrastructure to meet soaring AI-driven power demand. Experts say the Permian Basin must expand pipelines and generation capacity to compete with other U.S. shale regions.
ODESSA, Texas (P&GJ) — West Texas holds vast natural gas reserves that could help power the wave of energy-hungry artificial intelligence data centers, but the region lacks the pipelines and generation facilities needed to deliver that electricity, according to AP News.
Although the Permian Basin accounts for 40% of U.S. crude output, much of the gas produced alongside that oil has limited value without sufficient infrastructure to process and transmit it.
“Meeting this unprecedented demand takes more than production alone,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, said according to AP News. “It requires a strong network of pipelines and infrastructure to move natural gas efficiently and ensure reliable power for end users. In Texas, expanding this network has never been more important to keep pace with growth.”
Analysts say this leaves the Permian at a disadvantage compared with the Eagle Ford and Haynesville shales, which are better positioned with stronger transmission systems, access to LNG hubs, and more robust fiber optic networks. Jason Jennaro, CEO of FrontierGen, said companies with high energy demands — from cryptocurrency miners to industrial developers — may favor those regions over West Texas.
Jennaro, who authored a recent study on basin competitiveness, estimated the U.S. must add roughly 400 terawatts of generation capacity within five years to support AI growth. That figure, he noted, equals France’s annual power consumption. The Electric Reliability Council of Texas projects its grid could nearly double in size by 2030, with data centers and the oil and gas industry driving most of the demand.
In the Permian, gas that surfaces with oil often becomes a financial liability rather than a resource. Earlier this year, some producers were paying other firms to take excess gas. Redirecting that supply to data centers could transform a cost burden into a revenue stream, as reported by AP News.
To make that possible, the region would need not only new gas-fired power plants but also expanded pipeline capacity beyond the 6.5 billion cubic feet per day already moving through the system. Longanecker added that federal reforms to streamline pipeline permitting, which can stretch to seven years, are essential to unlock investment.
Jennaro pointed to the state-backed Permian Basin Reliability Plan, scheduled for completion by 2030, as a promising step.
“In our opinion, we are entering America’s Fourth Industrial Revolution,” he told AP News. “This revolution will be defined by the creation of large industrial nexus points where substantial amounts of electricity, transmission, natural gas, water, and fiber optics converge. Texas and its energy basins are a great place for this.”