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Chevron heading to West Texas, where the oil giant will build its first AI data center power project. The facility expected to be operational in twenty twenty seven as the energy company looks to capitalize on the boom in AI. Here to discusses the man in charge. His name is Mike Worth, the CEO of Chevron. Mike, great to see you in person, Katie.
It's good to be here.
So let's talk about, of course, this AI Data center power project, because I have to imagine this decision wasn't taken lightly to enter the energy or the power business. That is, so walk us through the decision tree there. Sure. Well.
First of all, we had an investor date today, our first one in almost three years.
Congratulations, Thank you.
We had a chance to talk about Chevron being bigger, stronger, and better than ever with growing free cash flow and earnings over the next five years, free cash flow growing it greater than ten percent compound daniel growth rate, driven out of our core business and then supplement and by
opportunities like the one that you refer to. We started working on this at least a couple of years ago, as we could see the coming boom in AI and the need for more power to support the data center build out, and anticipated that grid connected power could become increasingly problematic as people saw their electricity rates go up. And so our project is disconnected from the grid. It
will serve only a dedicated customer for AI. And of course the customers in the sector want large scale, they want it soon, and so we've made commitments to several large serbans. A lot of engineering work underway, site acquisition and permitting work underway, and we shared that with investors today.
And so this of course will be operational by twenty twenty seven. That's the plan. Who knows what the world will look like. And you think about Chevron obviously synonymous with oil and gas, but should we see this AI boom really continue and maintain sort of the trajectory that it's on. How big do you think that the power business within Chevron could be?
Yeah, it's hard to say. This is a first step. It's not been a core part of our strategy historically, and we have great respect for people that generate power, that serve utilities and customers. Today, that's not the market that we're going into. We're really talking about something that
we do to support our own business. We have five gigawatts of power generation we run twenty four hours a day three and sixty five days a year to support facilities in remote locations that don't have access to the grid.
This is a very similar concept where we will set up a facility that will have natural gas supply for the turbines and data center customers clustered around it that it can serve it a high degree of reliability, just as we do for our operations around the world, and so if it works for us, we would like to extend that and see if it can become a larger part of our business. This first step one that will learn a lot.
And just to be clear, I mean most of this gas you more or less have, right, I mean it's there on your own properties. Right.
This is in West Texas, the heart of the Permium basin, where not only is there a lot of oil production, pot of gas that comes with that. Often this gas can be discounted because it's far away from the market center. We need to get into pipelines and move it sort of create a demand hub close to where all this gas is and will be for many decades. Is a way to use that and not need access to all that trans.
The connectivity there though the idea of being able to transport that where it needs to go is that there or will it be there soon?
Well, one of the interesting things is it's actually easier to build fiber networks than it is pipelines, and so you can locate the data centers close to the gas and the power, you can connect into the fiber infrastructure, and moving electrons is easier than moving molecules, and so that is kind of at the heart of this location and the reason that we're looking at West Texas.
And let's talk about where else you're looking at outside of West Texas, because I know that you've said that you're going to increase exploration spending by about fifty percent. I know that you went into a little bit of detail in the Investor Day about where in the world you're looking. But where do you think that the most promising locations are at this point?
Well, we've acquired a lot of new acreage around the world, in South America where there's been a lot of success, in Guyana, in Brazil, We've acquired acreage in West Africa where there's been success in Namibia, where the largest leaseholder in the Gulf of America today, where there's a long history of success and we're one of the largest producers. And we're also interested in the Mediterranean, where there are
some areas that remain under explored. So we're exposed to a number of interesting basins around the world, and I think over the next several years you'll see increased exploration activity in all of those. And when it.
Comes to new countries entry into new countries, you think about Iraq, you think about Libya. Does did Trump administration play any role or in helping to guide along those negotiations.
I would say there's a role in guiding the negotiations, but there's certainly been a role in opening the door. I think we see countries around the world have a rendered interest in doing business with the US. That's both bringing investment dollars to the US and also opening up their countries to investors from the US. And I have any number of examples where we have operations around the world and we've seen new opportunities that have developed for
our industry and others to invest in both directions. And so I think the Trump administration has played a critical role in opening doors and creating an environment where people are looking to do these kinds of deals.
Based on what you can see, how far out you can see, our economic condition is going to be supportive not only to what you were just talking about there, but also some of the projections that you gave investors today with reguards to free cash flow, etc.
Absolutely, demand for energy will only grow into the future. In fact, the International Energy Agency today updated their scenariosoting laying out a scenario based on current policies that shows demand for oil and gas growing to a twenty to fifty very different than what some of their prior scenarios have indicated. We've long held a view that that is more likely than some of these other scenarios. So the underlying demand is very strong. Our portfolio was resilient even
at a lower oil price. We can generate strong free cash flow. We've increased our dividend thirty eight years in a row. We've repurchased shares twenty two or eighteen of the last twenty two years, so we've got a very strong track record of distributing free cash to shareholders, and at any price, we're well positioned to do that well.
Not at any price. I mean, I mean we're very reasonables. I mean we're at sixty bucks more or less for Brent and WTI is the idea that that for some reason came down into the fifties or even below. Is that still doable?
Oh?
Yeah, absolutely. Our dividend. We increased our dividend during COVID when prices were in the teams and went negative for a while. And so we've got to prepare for the volatility of commodity business. That's the business that we're in, and we've built a portfolio that will withstand the cycles of this business well.
With that in mind, I mean you talk about demand, it looks pretty good there, but then you think about the supply side of the equation. I know that you said earlier today that LNG spot prices in particular are going to be pressured due to high supply. How does that sort of dynamic overall look going into twenty twenty six, Does it ever come more into balance?
Well, I think oil prices in twenty twenty six are likely to feel more pressure than LNG prices. There's a lot of oil supply that's coming back from the OPEC plus countries that had been holding supply back, and so that has brought crude prices lower than they had been
for the prior period of time. LNG is a little bit of a longer dated story where there are a lot of new projects underway in the Middle East and in the United States that will add supply in large chunks over the second half of this decade, and demand tends to grow in a linear fashion and you get a step change of new supply, and so there's a period of time when it would appear we're going to see more supply coming into the market than demand we'll
be able to absorb. That probably results in lower spot prices. That's the commodity business that we're in.
Are there are there any sort of technological improvements that you see that actually makes the supply side of it a little bit more efficient.
Well, one of the things we talk a lot about today was not the power demand of AI, but what we can do with AI to improve our business, to make our business safer, to reduce emissions, to improve asset productivity, to improve efficiency, to improve our ability to explore for and find resources. And I think the story of technology in our industry is it only goes in one direction. It helps us do things at lower cost at higher efficiency.
And I think that story will be rewritten again with AI leading the next leg of that journey.
With regards to leading Chevron. And you've done a great job in investors and re rewarding you your plans right now to stick around.
I'm happy. I've got a full plate and my plans are to stick around as long as the board will happen.
Yes,