Microsoft and Chevron reach 20-year agreement; 2.67 million kW AI power project lands in Texas.

As the demand for AI computing power continues to surge, the collaboration between technology giants and energy giants is deepening.

According to Bloomberg, on June 22 local time, Chevron announced a 20-year long-term power supply agreement with Microsoft, to provide natural gas-powered electricity support for Microsoft’s planned large data center campus in West Texas. The project’s total installed capacity is estimated at 2.67 million kilowatts, enough to meet the electricity needs of more than 530,000 households, and is expected to become one of the largest supporting power projects for AI data centers in the U.S.

Against the backdrop of increasingly tight grid resources, technology companies are increasingly adopting the “self-built power source + data center” model to secure long-term, stable energy supply to meet the ever-rising demand for computing power in the era of artificial intelligence. This trend not only reflects AI infrastructure’s immense hunger for energy, but also signals a more profound symbiotic relationship forming between traditional energy companies and the technology industry.

AI Computing Power Competition Drives “Energy Scramble”

Microsoft is accelerating the expansion of its global data center footprint to cope with the surge in computing power demands brought by generative AI.

Microsoft previously stated that in the next two years, it will more than double its data center scale to maintain its competitive advantage in AI against Google and Amazon. The rapid expansion of data centers has also made electricity one of the most critical resources in the AI industry chain. According to Bloomberg forecasts, by 2030, the total electricity consumption of U.S. data centers will double from current levels, reaching 77 GW.

Facing ever-increasing power demands, multiple U.S. regions have begun to experience tight grid capacity and rising electricity prices, causing concern among regulators and consumers. Against this background, Microsoft is opting to cooperate directly with energy producers to obtain a long-term, stable, and predictable power source.

2.67 GW Natural Gas Power Station Directly Supplies Data Center

According to the agreement, Chevron will partner with investment firm Engine No.1 to jointly develop the power generation project named “Project Kilby.” The project is located near Pecos, Texas, is expected to be operational in 2028, and will be gradually expanded to 2.67 GW. The project will use GE Vernova gas turbines and rely on the abundant natural gas resources of the Permian Basin for power generation.

Unlike traditional models, this power station will supply electricity exclusively to Microsoft’s data center campus, not connecting to the public grid nor requiring distribution through local utility companies. Chevron’s head of new energy business, Jeff Gustavson, stated: “Consumers have already felt the impact of growing power demand, and this project was designed from the outset to avoid putting additional pressure on the local grid.” This integrated arrangement of “source-grid-load” not only avoids grid bottlenecks but also eases the tightness of public resources.

The Permian Basin is not only the largest shale oil producing area in the U.S., but also one of the most important natural gas producing regions globally. Due to the enormous output of natural gas, local pipeline transportation capacity has long been insufficient, with some gas even directly burned off. Chevron believes this constitutes a key competitive advantage for the project.

Gustavson pointed out: “This area has the richest natural gas resources in the U.S. and even globally. By building the data center directly near the production area, we can turn what could have been wasted natural gas into valuable power supply.” This model not only lowers energy transportation costs, but also greatly improves the efficiency of natural gas resource utilization, achieving a local combination of energy and computing power.

Securing Equipment, Betting $7 Billion: Chevron Takes the Lead on Computing Power Energy in Texas

According to reports, Chevron and Engine No.1 have jointly pre-ordered seven GE Vernova natural gas generator units. Amid ongoing tight supply and multi-year delivery cycles of gas turbines, this early secured equipment order provides key assurance for the project’s timely progress.

Although Chevron has not disclosed the exact investment amount, reports cite informed sources, the total investment for this project is estimated at around $7 billion. According to the plan, Chevron will make the final investment decision later this year. Engine No.1 also holds the right to acquire 50% equity of the project in the future and bear the corresponding capital expenditures, leaving flexibility in the capital structure for subsequent operations.

In recent years, more and more energy companies regard AI data centers as a new growth engine, and Texas currently has 33 GW of supporting power projects planned for data centers, ranking first in the U.S., even surpassing traditional data center hub Virginia. For oil giants, AI not only brings a surge in electricity consumption, but also a new long-term outlet for natural gas demand.

Chevron executive Gustavson stated that while many peers are still discussing similar concepts, Chevron has taken the lead in moving into the execution phase, seeing it as a key differentiating competitive advantage. As the AI industry continues to expand, deep partnerships between tech companies and energy firms are spreading across nuclear, natural gas, and energy storage facilities, with a nationwide infrastructure competition around computing power and energy accelerating across the U.S.

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