By Mrinalika Roy

Nov 21 (Reuters) - Shale gas producers in the U.S.

Permian Basin are sounding out data-center operators building up

capacity to power a boom in AI applications, aiming to ease the

pressure from a nearly two-year slump in the prices of the

commodity.

Devon Energy ( DVN ), Expand Energy ( EXE ), Diamondback

Energy ( FANG ), and Permian Resources ( PR ) have highlighted

the potential for AI and data centers to drive gas demand and

said they were in initial discussions with many operators.

U.S. data centers' energy needs could boost gas demand by

between 3 billion and 6 billion cubic feet per day (bcfd),

according to S&P Global Ratings estimates. The agency expects

U.S. data center power demand to increase 12% annually until the

end of 2030.

"Expectation of a step change in power demand has created

opportunities for increasing dialogue around the potential for

power generation and data projects within the Permian Basin" of

West Texas and New Mexico, Permian Resources ( PR ) co-CEO James Walter

said earlier this month.

The abundant and low-cost gas, vast surface area, supportive

regulatory environment, and long-dated inventory, could make the

region an attractive proposition for data-center developers.

Fueling this thinking is the persistent weakness in gas

prices. Average spot monthly prices at the U.S. Henry Hub

benchmark sank to a 32-year low in March and have remained weak.

"Rather than continuing to get low margins on our gas...

we're trying to figure out a way to be creative on ways to turn

some of that natural gas into more value for our shareholders,"

said Diamondback Energy ( FANG ) CEO Travis Stice.

Constraints on data center expansion in Texas due to the

electricity grid's limitations may pave the way for tripartite

agreements involving operators, utilities, and data center

developers, analysts told Reuters.

"That is the most likely path that we (will) travel down ...

I don't think a lot of the operators are willing to put the

capital down to build power plants," said Carson Kearl of energy

researcher Enverus.

CARBON FOOTPRINT

Operators willing to develop any kind of carbon capture and

storage (CCS) operation around the gas-fired power plants,

specifically in Louisiana and Texas, may gain an edge with

publicly traded hyperscalers, Kearl noted.

"The combination of natural gas and carbon capture provides

a winning formula that will help fuel the continued growth in

AI, data center build-outs," said BKV Corp ( BKV ) Chief Operating

Officer Eric Jacobsen.

Many hyperscalers, including tech giants Amazon ( AMZN ),

Microsoft ( MSFT ), and Alphabet's Google unit have

pledged to achieve net-zero carbon emissions and are thus keen

to reduce their data centers' carbon footprints.

"Our country needs to have sort of a Manhattan Project on

natural gas to be the supply source for power growth,

electricity demand growth that we see in AI," John Hess, CEO of

shale producer Hess Corp ( HES ), said in November at the Wolfe

Research Oil and Gas Conference.