Gas pipeline delays threaten AI data center project progress! Oracle (ORCL.US) offers a “truck luck” trick to guarantee electricity

The Zhitong Finance App learned that Oracle (ORCL.US) is using a novel power supply strategy — transporting gas directly to the server park by truck to ensure that multiple data center projects proceed according to plan. According to people familiar with the matter, while Oracle waited for the gas pipeline to be completed and connected to related equipment, the trucking method of transporting natural gas helped a data center located on the outskirts of Salt Lake City continue to advance for more than a year. One of the people familiar with the matter said that the company is also using this method at a park built for OpenAI in Shackelford County, Texas, to advance construction work in the early stages of the project.

According to sources familiar with the project, Oracle is currently considering adopting the same strategy in New Mexico. Delays in a local gas pipeline project originally used to power one of Oracle's most important data centers are threatening the project's schedule. People familiar with the matter said that by transporting compressed natural gas (CNG) to this data center called the “Jupiter Project” by truck, Oracle can launch the initial part of the project before the pipeline is officially put into operation.

This plan is of great importance. Last month, Oracle issued a force majeure notice to the developers of the project in New Mexico. If the project is further delayed, this notice may exempt the company from paying part of the payment.

Electricity supply has become a major bottleneck in the artificial intelligence (AI) data center boom. Many large server park projects use on-site power plants to provide electricity by burning natural gas. Normally, natural gas needs to be delivered through pipelines, and the design and construction of pipelines can take months.

Regulatory actions may also lead to delays in pipeline projects. In New Mexico, pipeline operator Energy Transfer (ET.US) had to replan the pipeline that would eventually power the Oracle data center after state regulators vetoed a proposed line. This delayed the pipeline company's target launch from this summer to next year.

Since it is difficult to ensure gas supply quickly, a group of companies specializing in gas compression and trucking have caught the boom in data center developers eager to start supplying computing power as soon as possible. These companies include Certarus, a subsidiary of Superior Plus Corp., and VoltaGrid LLC. They are actively promoting so-called “virtual pipeline” services as a transitional power supply solution to help customers obtain energy supplies before gas pipelines are put into operation.

In the Utah data center project, Oracle transports gas through Certarus; in Texas, VoltaGrid provides related services. Oracle wrote on social media: “Special thanks to the VoltaGrid team for finding a cost-effective power delivery solution to ensure that our customers can get OCI (Oracle Cloud Infrastructure) computing power capacity as planned.” Certarus declined to comment on the specific deal, but the company said that the increasing time required for data centers to obtain access to pipelines and grids “is generating a growing demand for energy solutions that can be deployed quickly and flexibly expanded.”

Notably, transporting compressed natural gas by truck is neither easy nor cheap. Jack Weixel, senior director of energy analysis at East Daley Analytics, said that if the fuel costs required for labor, special equipment, and the truck itself are taken into account, the arrival cost of compressed natural gas is about four times the price of natural gas delivered through major pipeline hubs.

The reason is that natural gas must first be extracted from the pipeline, then compressed into a trailer, and then transported to the site. The transportation time is sometimes several hours, and finally it has to be decompressed before gas can be supplied to the generator. Even a relatively small AI data center requires trucks to continuously transport gas throughout the day.

The high cost and complexity of operation are some of the reasons why compressed natural gas has always been mainly used in specific industrial operations. This type of operation includes mining or oil drilling and is usually located in remote areas, far from grid access points. Still, for companies like Oracle, this approach is probably the best stopgap right now. Oracle has invested billions of dollars and is betting its reputation on rapidly delivering data centers for customers like OpenAI. Currently, Oracle's free cash flow is negative, and this situation is expected to continue until more AI data centers are built.

The biggest question is how large this solution can actually be scaled up. Given the scale of the “Jupiter Project”, even to power a fraction of its total design capacity, dozens of vehicles of natural gas would need to be transported every day. Ellie Holbrook, an energy analyst at SemiAnalysis, said that if Oracle only transports compressed natural gas by truck to power the 100 megawatt power load — about 4% of the project's final 2.45 billion watts (2.45 gigawatts) total capacity — then the natural gas carried by each large trailer can only provide electricity for about 40 minutes.