Permian Gas Worth Less Than Nothing for 118 Days This Year; But New Demand Coming

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Outside Pecos, Texas, Chevron is getting ready to build a power plant to solve a problem the Permian Basin has been stuck with for years, which is that it produces far more natural gas than anyone nearby is willing to pay for.

Chevron's subsidiary, Energy Forge One, signed a 20-year agreement with Microsoft in June to build a gas-fired plant beside a data center campus, ramping up to roughly 2.67 gigawatts. The final investment decision is due by the end of this year, with power flowing in 2028.

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Most of the talk out of Midland this year has been about restraint, with fewer rigs, tighter budgets and what one trade publication called a transition to slower, more disciplined growth. That describes the oil side well enough, but it misses what's happening with gas.

WTI averaged $65 a barrel in 2025 and roughly $84 through July of this year, well above the $63 to $69 breakeven that Midland and Delaware basin operators reported to the Dallas Fed, so producers kept drilling.

The catch is that every barrel now brings up more gas than it did a few years ago, a rising gas-to-oil ratio that tends to come with age in almost any oil field.

The EIA expects Permian gas production to average 29.2 Bcf/d this year, up 6% and a record for the region.

There isn't enough pipeline to move all of it…

Waha, the pricing hub for Permian gas, traded negative on 118 of the first 131 trading days this year and is on pace to beat 2024's record for negative days.

Negative means producers pay someone to take the gas off their hands, which they do because the alternative is shutting in the oil well that's actually making them money. So the Permian's trouble isn't production; it's that one of its two products spends much of the year worth less than nothing.

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East Daley Analytics figures LNG terminals and data centers together will pull more than 20 Bcf/d of new demand, and that the pipelines now being built toward the Gulf Coast won't sit empty waiting for it.

Their read is that producers may end up drilling gassier acreage on purpose, just to keep both products moving through infrastructure that was designed mostly around crude.

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The plant going up at Pecos sits next to the wellhead, buys gas that would otherwise be competing for space in an oversubscribed gathering system, and burns it on site to make electricity the data center uses directly, never touching the public grid.

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The simple fact is that the Permian makes more gas than the market can absorb even after the pipelines get built, and data centers are the first buyers in years with enough money and enough impatience to put a power plant where the gas already is.

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