Natural gas pipeline delays threaten the progress of AI data center projects! Oracle (ORCL.US) resorts to the "trucking gas" strategy to ensure power supply

According to Zhitong Finance APP, Oracle (ORCL.US) is adopting an innovative power supply strategy—directly transporting natural gas by truck to server campuses to ensure that several data center projects proceed as scheduled. According to informed sources, while Oracle is waiting for the construction of the natural gas pipeline and for the connection of related equipment, transporting natural gas by truck has helped a data center located in the suburbs of Salt Lake City advance for more than a year. One of the sources said the company has also employed this method in Shackelford County, Texas, at a campus being built for OpenAI to support the early stages of the project.

People familiar with the project revealed that Oracle is currently considering using the same strategy in New Mexico. A local natural gas pipeline project that was originally intended to power one of Oracle's most important data centers has been delayed, threatening the project's schedule. According to sources, by trucking compressed natural gas (CNG) to the data center known as the "Project Jupiter," Oracle can bring the initial part of the project online before the pipeline is officially operational.

This plan is of great significance. Last month, Oracle issued a force majeure notice to the developer of the New Mexico project. If the project faces further delays, this notice could exempt the company from paying part of the costs.

Power supply has become a major bottleneck in the current boom of artificial intelligence (AI) data centers. Many large server campus projects are using on-site power plants, generating electricity by burning natural gas. Typically, natural gas is delivered via pipeline, but the design and construction of pipelines can take months.

Regulatory actions can also cause pipeline project delays. In New Mexico, pipeline operator Energy Transfer (ET.US) had to reroute the line that would eventually power Oracle's data center after state regulators rejected a proposed route. This pushed the pipeline company’s operational target date from this summer to next year.

With the difficulty in securing rapid natural gas supply, a number of companies specializing in natural gas compression and truck transportation have seized the opportunity amid data center developers’ urgent efforts to quickly start up compute power. These companies include Certarus, a subsidiary of Superior Plus Corp., and VoltaGrid LLC. They are heavily promoting so-called “virtual pipeline” services as a transitional power solution to help clients obtain energy supply before the natural gas pipeline is in service.

For its data center project in Utah, Oracle transports natural gas via Certarus; in Texas, the relevant service is provided by VoltaGrid. Oracle wrote on social media: “Special thanks to the VoltaGrid team for finding a cost-effective power solution to ensure our customers receive OCI (Oracle Cloud Infrastructure) compute capacity as scheduled.” Certarus declined to comment on specific transactions, but the company stated that the time required for data centers to obtain pipeline and grid access is continuously lengthening, “which is creating rapidly growing demand for energy solutions that can be quickly deployed and flexibly scaled.”

It is noteworthy that transporting compressed natural gas by truck is neither easy nor cheap. Jack Weixel, Senior Director of Energy Analysis at East Daley Analytics, stated that if labor, specialized equipment, and the fuel required to operate the trucks are included, the delivered cost of compressed natural gas is about four times the price of natural gas supplied via major pipeline hubs.

The reason is that the natural gas must first be extracted from the pipeline, then compressed into trailers, transported to the site—which can take hours—and finally decompressed to feed the generators. Even for a relatively small AI data center, trucks need to deliver gas continuously throughout the day.

The high costs and operational complexity are part of the reason compressed natural gas has primarily been used for specific industrial operations. Such operations include mining or oil drilling, usually located in remote areas far from grid access points. Nevertheless, for a company like Oracle, this method may still be the best makeshift solution for now. Oracle has invested billions of dollars and staked its reputation on the speedy delivery of data centers for customers like OpenAI. At present, Oracle’s free cash flow is negative, and this condition is expected to continue until more AI data centers are built.

The biggest question is how scalable this solution is. Given the size of Project Jupiter, even powering a small portion of its total designed capacity would require dozens of truckloads of natural gas every day. According to SemiAnalysis Energy Analyst Ellie Holbrook, if Oracle relies solely on trucking compressed natural gas to supply 100 megawatts of power—which is about 4% of the project's final 2.45 gigawatts (2,450 megawatts) total capacity—each large trailer of natural gas would only provide approximately 40 minutes of electricity.