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

Oracle Corporation (ORCL.US) is adopting a novel power supply strategydelivering natural gas directly to server campuses by truckto ensure that multiple data center projects stay on schedule. According to people familiar with the matter, while Oracle Corporation waits for natural gas pipelines to be completed and connected to related equipment, trucking natural gas has helped a data center in a Salt Lake City suburb keep advancing for more than a year. One of the people said the company is also using this method for a campus it is building for OpenAI in Shackelford County, Texas, to advance the project's initial construction work. People familiar with the project said Oracle Corporation is currently considering using the same strategy in New Mexico. Delays in a natural gas pipeline project that was originally intended to power one of Oracle Corporation's most important data centers are threatening the project's timeline. The people said that by trucking compressed natural gas (CNG) to the data center, known as "Project Jupiter," Oracle Corporation can bring the project's initial portion online before the pipeline officially begins operating. The plan is a major undertaking. Last month, Oracle Corporation sent a force majeure notice to the developer of the New Mexico project. If the project is further delayed, the notice could exempt the company from paying certain amounts. Power supply has become a major bottleneck in the artificial intelligence (AI) data center boom. Many large server campus projects are using on-site power plants that burn natural gas to provide electricity. Typically, natural gas needs to be transported through pipelines, and designing and building pipelines can take months. Regulatory actions can also lead to pipeline project delays. In New Mexico, pipeline operator Energy Transfer (ET.US) had to reroute a pipeline that will ultimately power Oracle Corporation's data center after state regulators rejected a proposed route. This pushed the pipeline company's target in-service date from this summer to next year. Because it is difficult to secure natural gas supplies quickly, a group of companies specializing in natural gas compression and trucking have seized on data center developers' urgent desire to start computing capacity as soon as possible. These companies include Certarus, a unit of Superior Plus Corp., and VoltaGrid LLC. They are aggressively promoting so-called "virtual pipeline" services as a transitional power supply solution that helps customers obtain energy before natural gas pipelines enter operation. In the Utah data center project, Oracle Corporation transports natural gas through Certarus; in Texas, the related services are provided by VoltaGrid. Oracle Corporation wrote on social media: "Special thanks to the VoltaGrid team for finding a cost-effective power supply solution to ensure our customers can get OCI (Oracle Corporation cloud infrastructure) computing capacity on schedule." Certarus declined to comment on specific transactions, but the company said that the ever-longer time required for data centers to obtain pipeline and grid access "is driving growing demand for energy solutions that can be deployed quickly and scaled flexibly." It is worth noting that trucking compressed natural gas is neither easy nor cheap. Jack Weixel, senior director of energy analysis at East Daley Analytics, said that when labor, specialized equipment, and the fuel costs required to operate the trucks themselves are included, the delivered cost of compressed natural gas is about four times the price of natural gas transported through major pipelines by Hub Group, Inc. Class A. The reason is that natural gas must first be extracted from pipelines, then compressed into trailers, then transported to the sitesometimes taking hoursand finally depressurized before it can supply gas to generators. Even a relatively small AI data center requires trucks to continuously deliver natural gas throughout the day. High costs and operational complexity are part of the reason compressed natural gas has mainly been used in specific industrial operations. These operations include mining or oil drilling, which are often located in remote areas far from grid access points. Still, for a company like Oracle Corporation, this approach may remain the best stopgap available. Oracle Corporation has invested billions of dollars and staked its reputation on rapidly delivering data centers to customers such as OpenAI. Currently, Oracle Corporation's free cash flow is negative, and that situation is expected to persist until more AI data centers are built. The biggest question is how far this solution can actually scale. Given the size of "Project Jupiter," even powering only a small portion of its total designed capacity would require transporting dozens of truckloads of natural gas per day. Ellie Holbrook, an energy analyst at SemiAnalysis, said that if Oracle Corporation used trucked compressed natural gas alone to supply a 100-megawatt power loadabout 4% of the project's eventual total capacity of 2.45 billion watts (2.45 gigawatts)then the natural gas delivered by each large trailer would provide only about 40 minutes of electricity.