Microsoft and Chevron enter exclusivity deal on powering West Texas AI data center complex

Chevron and Microsoft are engaged in an exclusivity agreement regarding a proposed co-located gas-fired power plant and an AI data center campus in West Texas. This potential deal would represent the largest collaboration between a U.S. oil and gas giant and a major tech company. Chevron is developing a power plant hub in West Texas's Permian Basin, starting with 2.5 gigawatts of gas-fired power and the potential to double to 5 gigawatts. The multibillion-dollar project could begin operation as early as late 2027 and has involved months of negotiations with potential hyperscaler clients. Chevron has already partnered financially with Engine No. 1 and ordered seven gas turbines from GE Vernova. According to a joint statement from Chevron, Microsoft, and Engine No. 1, no definitive agreement has been finalized, but the approach signifies a shift towards bringing energy supply closer to demand through co-located, behind-the-meter generation. This strategy aims to enhance reliability and alleviate pressure on regional electricity systems. Chevron CEO Mike Wirth emphasized at the CERAWeek energy conference that access to power is becoming the primary limiting factor for growth in the tech sector, especially with the AI boom. He stated that Chevron aims to assist hyperscalers with power and permitting issues, leveraging abundant natural gas as a foundational energy source for the industry's expansion, particularly in the U.S.'s competition in the AI race against China.