A small oil company in California could demonstrate how the tech sector can use natural gas to power surging energy demand from artificial intelligence while still meeting climate goals. California Resources Corp. is an independent oil and gas company focused entirely on the Golden State, with a market capitalization of about $4.6 billion and proven preserves of 377 million barrels as of 2023. CRC spun off from oil giant Occidental Petroleum in 2014 , but struggled on its own and ultimately filed for Chapter 11 bankruptcy in July 2020 as energy prices collapsed due to the Covid-19 pandemic. It emerged from bankruptcy several months later and has restructured with a growing focus on developing carbon capture and storage technology to slash emissions from natural gas and heavy industry. CRC may now sit in a sweet spot to capture business from growing power demand from data centers. CRC plans to retrofit its Elk Hills gas plant in California’s Central Valley with carbon capture technology. The plant sits close to where developers have announced a gigawatt of AI data centers by 2028, Bank of America analyst Kalei Akamine told clients in a Wednesday note. “No-one else is further along,” Akamine said of CRC’s investments in carbon capture. “Development is still conceptual, but datacenters may be the commercial opportunity to push this forward.” Bank of America has upgraded CRC to buy from neutral on the data center opportunity, with a price target of $65 per share, implying 31% upside from Tuesday’s close of $49.49 per share. CRC YTD mountain Year-to-date performance of California Resources Corporation Carbon capture is controversial because of the high upfront capital costs and the perception that it is just a way for oil companies to perpetuate fossil fuel production. The tech companies have publicly focused on renewables and nuclear power to address their energy needs while meeting climate commitments. “But that attitude may be changing as the market comes to grips with power demand implications that the data center buildout portends,” Akamine wrote. Carbon capture could represent “fast track to clean power at a time when deep-pocketed data centers, with the ability to pay, appear increasingly willing to consider the best options on offer,” he wrote. Analysts generally agree that natural gas will have to play a role in powering these computer warehouses due to the challenges renewables face with providing power when weather conditions are not ideal. And nuclear, though emissions free, is very expensive and time-consuming to build new. The success case for CRC would be to directly connect 200 megawatts of power from its Elk Hills plant to a data center. If “dirty utility power” is worth more than $200 per megawatt hour, clean natural gas should be worth even more than that, Akamine wrote. At that price, the value of the Elk Hills plant would surge to $2 billion from $650 million, the analyst said. Such a project would be one of the first of its kind, he said. CEO Francisco Leon made clear on CRC’s second-quarter earnings call that the company views AI demand as an opportunity, with its carbon capture assets located in the heart of a state that is home to two of the top 10 largest data center markets in the U.S.: Silicon Valley and Los Angeles. “Our Elk Hills complex, for example, is in the sweet spot and can meet the data center needs and provide accelerated time to market benefits that other potential competitors simply cannot match,” Leon said. CRC can offer data centers speed to market, but also “bring a decarbonized power generation into the fold,” Leon said.