Microsoft enters exclusive talks with Chevron over $7 billion Texas power plant for AI expansion

Microsoft in Talks With Chevron, Engine No. 1 Over $7 Billion Texas Power Plant

Microsoft Corp. is in exclusive talks with Chevron Corp. and investment fund Engine No. 1 over a long-term deal that would underpin a giant energy complex in West Texas, providing electricity to power a large data center campus. The proposed natural-gas fired power plant in West Texas is projected to cost about $7 billion and initially generate 2,500 megawatts of electricity, making it one of the largest of its kind in the US, according to people familiar with the matter, who asked not to be identified because the talks are ongoing. "Chevron, Microsoft, and Engine No. 1 have entered into an exclusivity agreement related to a proposed power generation and electricity offtake arrangement," the companies said in a statement to Bloomberg. "No commercial terms have been finalized, and there is no definitive agreement at this time." Chevron and Engine No. 1 had previously disclosed some details of their proposed power plant, but not the end user. A deal with Microsoft would secure a long-term customer for the plant's electricity and help finance its construction. The project, which could be up and running before 2030, still requires tax and environmental approvals as well as agreement of commercial terms. Microsoft, a longtime backer of ChatGPT maker OpenAI, is doubling down on constructing data centers as it battles rivals Alphabet Inc. and Amazon.com Inc. for supremacy in artificial intelligence. Access to reliable baseload power is emerging as a key challenge -- one the Chevron and Engine No. 1 partnership expects to address given its extensive natural gas production in West Texas and contracts for large turbines. The new generation of data centers is being built farther from major population centers and closer to sources of fuel due to their enormous power demands. Chevron and Engine No. 1's chosen site is near the city of Pecos, close to the Texas-New Mexico border in the heart of the Permian Basin, the largest oil-producing field in the US. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Plus Signed UpPlus Sign UpPlus Sign Up By continuing, I agree to the Privacy Policy and Terms of Service. The Permian produces so much natural gas -- a by-product of oil -- that it often overwhelms pipelines. As a result, some gas has to be burned off because it can't be transported to where it's needed, making the region an ideal location for power plants. Landbridge Co. LLC, a large landowner in the area, said at least nine large data center projects have been proposed across North and West Texas over the past two years. Key to Chevron's push into power for AI is its partnership with Engine No. 1, the investor that led a successful activist campaign against archrival Exxon Mobil Corp. in 2021. The collaboration secured an order for seven large natural gas turbines from GE Vernova Inc., which are in such high demand that new customers face years-long waiting lists. The power project in Pecos could be operational in 2027 and would take three years to ramp up to 2,500 megawatts, Chevron has said. That's equivalent to more than of two typical nuclear reactors, according to the Department of Energy. If successful, the plant may eventually expand to as much as 5,000 megawatts. Filed under the entity "Energy Forge One LLC," Chevron has applied for several tax abatements with local authorities in West Texas. Its application for an air emissions permit with the Texas Commission on Environmental Quality was declared administratively complete in October.

Microsoft, Chevron and Engine No. 1 sign exclusive deal for power supply

March 31 (Reuters) - Microsoft (MSFT.O), opens new tab, Chevron (CVX.N), opens new tab and investment fund Engine No. 1 have entered into an exclusivity agreement for power generation and supply, the three companies said on Tuesday. 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 (GEV.N), opens new tab. 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. 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 (ORCL.N), opens new tab and OpenAI, Bloomberg News reported last week. Reporting by Juby Babu in Mexico City; Editing by Leroy Leo Our Standards: The Thomson Reuters Trust Principles., opens new tab

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

Chevron is developing a power plant hub with 2.5 gigawatts of gas-fired power in West Texas -- enough to power nearly 2 million homes -- and has negotiated for months with potential hyperscaler clients. The multibillion-dollar project is scalable to 5 gigawatts and could start coming online as early as late 2027. Chevron already has a financial partnership with the Engine No. 1 investment firm and seven gas turbines ordered from GE Vernova. "No commercial terms have been finalized, and there is no definitive agreement at this time," Chevron, Microsoft, and Engine No. 1 said in a statement. "The approach reflects an emerging shift in how power for AI is being developed, bringing energy supply closer to demand through co-located, behind-the-meter generation to deliver reliability while helping avoid added strain on regional electricity systems," the statement said. The top American Big Oil players, Chevron and Exxon Mobil, have historically stayed out of the power sector, except for Chevron powering some of its own oil and gas operations overseas. But the AI boom has triggered a pivot for Chevron. In the Permian Basin, Chevron produces more than 1 million barrels of oil and gas (barrels of oil equivalent) every day. The natural gas, in particular, makes Chevron a potentially attractive partners for hyperscalers looking to quickly build data center campuses near fuel sources. Chevron has said it also is looking at co-located power projects in the Midwest and West. Last week at the CERAWeek energy conference in Houston, Chevron chairman and CEO Mike Wirth said the company wants to help the U.S. in the AI race against China, including helping hyperscalers with their gas in power and permitting issues. The Big Oil and Big Tech sectors are partnering like never before, he said. "What you're seeing is these two worlds coming together, and power really is becoming the great limiting element for growth," Wirth said. "What's really concerning people is access to power, so you see a lot of creative deals being done. We're working hard with some of the biggest companies in the world, trying to help them grow their business and be a part of that solution." Wirth said the tech sector has come to realize "you can't take a big extension cord to the grid and plug in a data center." "It's been a process of really helping to understand how do we meet their needs, and how do they help commit to power purchase agreements that allow them to come into the system as rapidly as they want," Wirth said. While wind and solar and other sources of power will play big roles in the AI boom, Wirth called abundant, American natural gas the "foundation" for powering the sector's growth. The U.S. leads the world in both natural gas production and exports. Mentioning the price spikes driven by the war in Iran, Wirth said, "The one commodity that hasn't been touched is pipeline gas in the U.S., which is pretty much flat."

Microsoft, Chevron and Engine No. 1 sign exclusive deal for power supply - The Economic Times

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 centre campus, Bloomberg said.Microsoft, Chevron and investment fund Engine No. 1 have entered into an exclusivity agreement for power generation and supply, the three companies said on Tuesday. Technology companies, including Microsoft, are rushing to secure electricity supply for their rapidly expanding data ⁠centres 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 centres 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 centre campus, Bloomberg said. Chevron had in November said its first ⁠project to power an AI data centre using natural gas will be built in West Texas with the goal of start-up by 2027. Microsoft has agreed to rent a data centre project in Texas that was originally being developed for Oracle and OpenAI, Bloomberg News reported last week.

Microsoft Reportedly Explores $7 Billion Texas Power Deal With Chevron, Engine No. 1 To Fuel AI Data Cent

AI Boom Drives Urgent Need For Power In a statement, the three companies said that no definitive agreement or commercial terms have been finalized yet, Reuters reported on Tuesday. The Satya Nadella-led tech giant is working on securing a dedicated electricity supply chain to meet the surging demand from AI workloads. Companies like Microsoft have increasingly been on the lookout for reliable energy sources to support data centers powering AI platforms like Copilot and ChatGPT. $7 Billion Texas Project At The Center The discussions are tied to a proposed natural gas-fired power plant in West Texas, with a reported value of around $7 billion. Initially, the facility could generate approximately 2,500 megawatts of electricity, Bloomberg reported, citing people familiar with the matter. Microsoft, Chevron and Engine No. 1 did not immediately respond to Benzinga's request for comments. Price Action: On Tuesday, Microsoft shares closed at $370.17, up 3.12%. It gained 0.76% to $373.00 in after-hours trading. Meanwhile, Chevron shares closed at $206.90 on during the regular trading hours, down 1.81% and fell another 0.92% to $205 in after-hours trading, according to Benzinga Pro. Benzinga Edge Stock Rankings show that MSFT is in a downtrend across the short, medium and long term, while maintaining a strong Quality score in the 94th percentile. Foto: Photo Spirit / Shutterstock.com Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.