OpenAI remains non-committal on Argentina data centre project

The status of the project

OpenAI recently clarified its involvement in a large-scale data centre project in Argentina. According to the Financial Times, the company described itself as only a "potential offtaker" for the 500MW facility announced by President Javier Milei last October.

An offtaker is a company that agrees to buy the output of a power plant or infrastructure project. OpenAI's stance suggests that while they are a possible customer, they have not committed to a purchase agreement yet. The company noted that any final deal would depend on Sur Energy successfully developing the site.

Since the initial announcement of the project, which was dubbed Stargate Argentina, there have been no further public developments. While the infrastructure company Sur Energy suggested the ball was in OpenAI's court, the AI firm is maintaining a cautious position until construction progress is made.

Argentina's energy landscape

Argentina is positioning its Patagonian land and energy resources as a primary destination for AI developers. The country currently faces a significant gap in infrastructure, with less than 40MW of data centre capacity. This stands in stark contrast to Chile, which currently hosts 400MW of capacity.

To bridge this gap, the government is pitching the use of 'flared' gas. Flaring is the practice of burning off gas as a byproduct of shale oil drilling. One existing 12MW site in the Neuquén province already runs on this gas, which Unblock Energy says would otherwise be wasted.

Unblock Energy estimates that drillers at the Vaca Muerta shale field waste about 600MW of potential electricity through flaring. They also claim that up to 3GW of gas is being left in the ground simply because there is no current demand for it. This creates a massive opportunity for data centres to operate without competing with human needs for power.

Government incentives and rules

President Milei has proposed a specific incentive regime to attract large AI investments to the country. This plan includes a proposed 15% tax rate for these types of projects. The incentive regime has already passed the lower house and is currently awaiting a vote in the Senate.

The government is also introducing new rules to manage the national grid. New large projects in any industry must now provide the infrastructure for 80 per cent of their electricity. This requirement is designed to prevent new developments from overloading the existing power grid.

While these rules aim to protect the grid, some observers believe the benefits for developers are excessive. However, the lack of restraints makes Argentina one of the few countries where large-capacity data centres could potentially be implemented in a short period of time.

The competition for power

Argentina is not the only nation vying for the attention of AI developers. Other countries are actively competing for the same capacity, including various regions in Southeast Asia and the United Kingdom. The UK, for example, is currently prioritizing its grid for data centre use.

Other energy players in Argentina are also making moves to capture the AI market. Pampa Energy reported in October that it has 800MW of energy capacity available in the Neuquén province specifically for data centres. Additionally, the Polish company Green Capital has announced a $3bn data centre project in the Chubut province.

The structural bottleneck for AI is increasingly defined by electrons rather than computing power. By offering stranded gas and vast land, Argentina is attempting to solve the power problem that currently limits the expansion of large-scale AI models. The success of the OpenAI-linked project will depend on whether these energy offers can be converted into functional infrastructure.