Microsoft in exclusive talks with Chevron and Engine No. 1 over $7B Texas natural gas power plant for data centers
Apr 1, 2026
Key Points
- Microsoft is in exclusive talks with Chevron and Engine No. 1 to build a $7 billion natural gas power plant in West Texas generating 2,500 megawatts to power a data center campus, potentially operational before 2030.
- The Permian Basin's natural gas surplus, currently flared as oil extraction waste, becomes nearly free power for Microsoft's AI infrastructure by capturing stranded fuel at the source instead of transporting it.
- The deal requires tax and environmental approvals and final commercial terms; natural gas prices are currently low, reducing near-term fuel cost risk for the facility.
Summary
Microsoft has entered exclusive talks with Chevron and Engine No. 1 to build and operate a $7 billion natural gas power plant in West Texas. The facility would generate 2,500 megawatts of electricity to power a large Microsoft data center campus, with potential operation before 2030.
Microsoft needs reliable baseload power to expand AI infrastructure and support OpenAI workloads. The Permian Basin produces enormous amounts of natural gas as a byproduct of oil extraction, much of which gets flared because pipelines cannot transport it efficiently. A power plant built at the source can capture that gas and feed electricity directly to a nearby data center, eliminating both wasted energy and the need to transport power elsewhere. Chevron and Engine No. 1 have extensive natural gas reserves and turbine capacity in the region to support this model.
Crusoe Energy has demonstrated a similar approach, using stranded or flared gas to power Bitcoin mining operations at near-zero fuel cost.
The project still requires tax and environmental approvals and final agreement on commercial terms. Natural gas prices are currently low, well below the spikes seen in November and December 2024, which reduces near-term fuel cost risk for the facility.