Artificial intelligence continues to drive massive shifts in global energy demand, prompting even traditional oil giants like ExxonMobil to diversify their portfolios. This week, Exxon announced ambitious plans to construct a natural gas-powered electricity plant designed specifically to support data centers — the digital backbone of the AI revolution.

As AI workloads scale up rapidly, demand for electricity is outpacing the current infrastructure. Estimates suggest that nearly half of all planned AI data centers may face power shortages by 2027. Exxon’s new venture highlights the energy sector’s growing need to innovate and adapt to the demands of the digital era.

Natural Gas Power Plant Aimed at AI Infrastructure

ExxonMobil, which already operates several power plants to support its internal operations, is stepping into new territory. The upcoming project will be Exxon’s first power plant built to serve external customers—specifically tech companies and data centers requiring reliable, high-capacity energy.

The plant is expected to generate over 1.5 gigawatts of electricity and will run exclusively on natural gas. Unlike most traditional power production facilities, Exxon’s plant will not be connected to the existing power grid. Instead, it will be a so-called “islanded” facility, operating independently of the national grid, a move designed to circumvent the long interconnection queues hindering many new electricity projects.

In an investor strategy document released this week, the company described the initiative as offering “reliable, fully-islanded power with no reliance on grid infrastructure.” While specifics about the plant’s location remain undisclosed, sources indicate that the facility is expected to be operational within the next five years.

Carbon Capture and Storage: Exxon’s Emissions Solution

One of the most notable aspects of the project is Exxon’s plan to incorporate carbon capture and storage (CCS) technology. The company stated that it aims to capture and store over 90% of the carbon dioxide (CO₂) emissions generated by the plant. CCS is still a relatively nascent technology, particularly in the context of natural gas-fired power plants, but Exxon believes this innovation will make the facility more environmentally viable.

Despite the environmental benefits, CCS comes with a financial cost. The construction and maintenance of carbon capture systems can significantly increase capital and operational expenditures. According to the Global CCS Institute, very few power plants around the world currently implement CCS effectively, and none of the existing projects utilize natural gas as a fuel source. Exxon’s endeavor could mark a significant milestone if successful.

That said, the technology has had mixed results. For instance, a coal-fired CCS project in Canada promised a 90% capture rate but only achieved around 60% efficacy over nearly a decade of operations, as reported by the Institute for Energy Economics and Financial Analysis (IEEFA).

Tax Incentives Fuel Carbon Capture Adoption

Exxon’s decision to lean into carbon capture is likely influenced by generous U.S. tax credits introduced under the Inflation Reduction Act. These credits provide between $60 and $85 per metric ton of CO₂ captured and stored, significantly boosting the economic feasibility of CCS-equipped facilities. For a company like Exxon, these incentives can help offset the high upfront cost and improve long-term profitability.

Competing With Clean Energy Giants

While Exxon makes its move into AI-specific energy production, major tech firms are investing heavily in renewable energy. Google has announced a $20 billion renewable energy partnership poised to start delivering power in 2026, while Microsoft is contributing to a $5 billion, 9-gigawatt clean energy portfolio. Their initial solar projects are expected to come online within six to nine months.

Renewables continue to dominate headlines thanks to their rapidly falling costs and shorter deployment timelines. While nuclear energy remains a long-term contender for powering data centers, most projects aren’t expected to go live until the early 2030s. Exxon’s gas-fired, CCS-equipped plant offers a faster alternative, aiming to be fully operational by the end of the decade.

Future of Power in the AI Age

AI is reshaping global industries, and with it, the demand for reliable and robust power infrastructure. Exxon’s entrance into this space exemplifies how legacy energy companies are evolving to serve the 21st-century data economy. While the company has not disclosed the exact location or customer base for its new plant, its commitment to speed, scale, and emissions control signals a new strategic direction for the oil giant.

Whether Exxon can compete effectively alongside the rapid advancements in renewables remains to be seen. However, by leveraging its expertise in large-scale energy infrastructure and integrating emerging CCS technologies, Exxon is staking its claim in the future of digital power generation.