Microsoft, Chevron and investment fund Engine No. 1 have entered into an exclusivity agreement for power generation and supply, the three companies said.
Here are three key points regarding the recent partnership between Chevron, Microsoft and Engine No. 1:
- Massive Infrastructure Investment: The companies have entered an exclusivity agreement to negotiate a $7 billion natural gas-fired power plant in West Texas. The facility is expected to generate approximately 2,500 MW of electricity, making it one of the largest of its kind in the United States.
- "Behind-the-Meter" AI Power: The project follows an emerging "behind-the-meter" strategy, where the power plant is co-located directly with a massive Microsoft AI data center campus. This allows Microsoft to bypass the traditional, often strained regional power grid to ensure a reliable, "always-on" energy supply for its AI ambitions.
- Monetizing Permian Resources: Located near Pecos, Texas, the plant will utilize "associated gas"—natural gas produced as a byproduct of oil drilling in the Permian Basin. This provides a lucrative outlet for gas that is often sold at a discount or flared off due to a lack of pipeline capacity, while helping Microsoft secure the energy needed to double its data center footprint by 2028.
Technology companies, including Microsoft, are rushing to secure electricity supply for their rapidly expanding data centers that would power generative artificial intelligence services such as ChatGPT and Copilot.
"No commercial terms have been finalized, and there is no definitive agreement at this time," the three companies said in a statement.
Chevron and Engine No. 1 had already announced a partnership last year to build natural gas-based power plants next to data centers in the U.S., with the two planning to use turbines by electric services company GE Vernova.
Bloomberg News, which has reported the deal with Microsoft, said the long-term agreement is tied to a proposed natural gas-fired power plant in West Texas, with a projected cost of roughly $7 billion.
The facility would initially generate 2,500 megawatts of electricity, intended to power a large data center campus, Bloomberg said.
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Chevron had in November said its first project to power an AI data center using natural gas will be built in West Texas with the goal of start-up by 2027.
Microsoft has agreed to rent a data center project in Texas that was originally being developed for Oracle and OpenAI, Bloomberg News reported last week.
