U.S. oil giant Chevron has signed a 20-year power supply agreement with Microsoft, planning to build a power plant on-site in the Permian Basin, the largest shale oil producing region in the U.S. The plant will use locally abundant associated natural gas to directly power a data center Microsoft is planning in Pecos, Texas. The entire project will be fully self-generated and self-supplied, without connecting to the public grid. Jeff Gustavson, president of Chevron’s New Energy business unit, said the power plant is expected to achieve its first grid connection in 2028 and gradually increase total generation capacity to 2.67 gigawatts over the following years. Chevron is working with investment fund Engine No. 1 on the project; the latter holds an option to purchase a 50% stake, and both parties plan to make a final investment decision later this year. In April, sources estimated the entire project’s value at around $7 billion.
Natural gas production in the Permian Basin far exceeds pipeline transportation capacity, and large volumes of associated gas are often flared on site, making local natural gas prices extremely low. Chevron and Engine No. 1 have ordered seven gas turbines from GE Vernova, which currently faces a backlog of delivery orders. According to Cailianshe, Microsoft plans to double its data center scale over the next two years to compete with Google and Amazon AWS. The share of electricity used by U.S. data centers is expected to at least double by 2030 compared to now, and the strain on the grid has already begun to push up consumer electricity bills and spark political controversy. Texas currently has 33 gigawatts of planned data center power projects, the most in the nation.