Virgin coconut oil (VCO) is an edible vegetable oil that is eco-friendly, biodegradable, and sustainable, with high thermal and chemical stability as a phase change material (PCM). In this work, VCO filled with fumed silica A200 nanoparticles was tested as a cutting fluid in drilling processes. Silica concentrations ranging from 1 to 4 vol% were analyzed. Thermal properties were evaluated by differential scanning calorimetry (DSC) and thermal conductivity measurements at different temperatures and concentrations. Thermal conductivity showed an enhancement with the addition of silica powder and reduced with increasing temperature. Based on thermal and flow properties, VCO-3A200 was found to be the optimal concentration. The thermal images of this nanofluid taken after 60 s of drilling exhibited a reduction of 12 °C with respect to the dry process. The friction coefficient versus shear rate was also measured. With 8% VCO, a reduction in the friction coefficient of 8% compared to the dry test was achieved. The addition of 3 vol% of silica to the base oil reduced the friction coefficient by 16% compared to the dry test. The use of fumed silica dispersed in VCO has proven to be a sustainable, recyclable, and environmentally friendly refrigerant and lubricant cutting fluid.