West Texas holds a treasure trove of natural gas that could become a critical power source for artificial intelligence data centers, but industry leaders warn the region is not yet prepared to meet the opportunity. Despite its dominance in oil output, the Permian Basin lacks the pipeline capacity, transmission networks, and power generation facilities needed to deliver reliable electricity at scale. Without new investment, experts say the Permian risks losing out to other basins better equipped to serve the next wave of energy-intensive industries.
Infrastructure Gaps Threaten Permian Competitiveness
The Permian produces roughly 40 percent of U.S. crude oil, and with that comes large volumes of associated gas. Much of this gas remains underutilized, however, because the infrastructure to process and move it to end markets has not kept pace with production growth.
“Meeting this unprecedented demand takes more than production alone,” said Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association. “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.”
Other shale regions have a head start. The Eagle Ford and Haynesville benefit from proximity to LNG hubs, stronger transmission lines, and more developed fiber optic networks. Jason Jennaro, CEO of FrontierGen, noted that these advantages make those basins more attractive to high-demand customers such as cryptocurrency miners, industrial operators, and data center developers.
Jennaro, who recently studied basin competitiveness, estimated the U.S. must add approximately 400 terawatts of new generation capacity over the next five years to support artificial intelligence expansion. That figure alone is equivalent to France’s entire annual electricity consumption. The Electric Reliability Council of Texas (ERCOT) projects that demand on its grid could nearly double by 2030, with much of the growth fueled by data centers and the oil and gas sector.
Turning Gas Liabilities Into Revenue Streams
The infrastructure gap is particularly costly for Permian producers. Associated gas that surfaces with oil often becomes more of a burden than a benefit. In early 2025, some operators were reportedly paying third parties to take excess volumes off their hands. Redirecting that gas toward local power generation for AI data centers could turn stranded supply into a profitable outlet.
To achieve that, however, the region must see investment in new gas-fired power plants and significantly more pipeline capacity. The system already handles about 6.5 billion cubic feet per day, but analysts argue that is insufficient given projected demand.
Policy reform is also seen as a key factor. Longanecker highlighted the federal permitting process for pipelines, which can take up to seven years, as a major obstacle to new development. Faster approvals, he argued, are essential if West Texas hopes to unlock its potential and meet the timeline of technology developers eager to bring new facilities online.
Toward a Fourth Industrial Revolution
Despite these challenges, momentum is building around initiatives to strengthen the region’s energy backbone. The Permian Basin Reliability Plan, backed by the state of Texas and slated for completion by 2030, is designed to improve grid resilience and expand energy infrastructure across the basin.
Jennaro believes such initiatives are critical as the United States enters what he calls the Fourth Industrial Revolution. “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,” he said. “Texas and its energy basins are a great place for this.”
For West Texas, the challenge is clear. The basin has the resources to fuel data centers, digital economies, and future industries, but without the infrastructure to deliver that energy reliably, it risks losing market share to competitors. If operators, regulators, and policymakers can align, the Permian could shift from paying to offload excess gas to becoming a global hub for power-hungry technologies.
