Oracle Turns to Trucked Natural Gas Amid Pipeline Delays
Written with artificial intelligence.
Oracle is resorting to trucking compressed natural gas to its AI data centres in Utah and Texas due to pipeline delays, which is impacting its construction schedules. The company's shares dropped approximately 5.5% following this news, highlighting investor concerns about potential delays in AI capacity and future cash flow.
Overview of Oracle's Situation
Oracle has begun trucking compressed natural gas to its AI data centres in Utah and Texas, as reported by Bloomberg. This action is taken while the company waits for essential pipeline infrastructure to be completed. Following this announcement, Oracle's shares fell by about 5.5%, reflecting investor anxiety over the potential for power constraints to delay AI capacity development.
Project Jupiter and Force Majeure Notice
The company is considering the same trucking method for its Project Jupiter in New Mexico, where delays in pipeline construction could jeopardize timelines. Last month, Oracle issued a force majeure notice to the project’s developer, which could alleviate some financial responsibilities amid ongoing delays. The pipeline operator, Energy Transfer, faced challenges that required rerouting the pipeline, pushing the expected startup date to next year.
Cost Implications of Trucked Gas
Utilizing trucked gas comes with substantial costs, estimated at four times the price of gas delivered via pipelines, once labor and equipment expenses are factored in. It is also a logistical challenge; powering just 100 megawatts of Project Jupiter’s anticipated 2.45 gigawatts would require each large trailer to provide approximately 40 minutes of power.
Growing Demand for Natural Gas
This scenario underscores how critical power supply has become in the AI sector, surpassing even the demand for chips. Oracle's significant investments reflect its commitment to fast-tracking capacity, as its free cash flow is expected to remain negative until more sites are operational. The situation may also indicate an increasing demand for natural gas within the data centre market, benefiting virtual pipeline suppliers like Certarus and VoltaGrid. The determination of whether trucked gas can effectively support Project Jupiter hinges on the timely arrival of the New Mexico pipeline.
This article is for information only and is not investment advice.