Chevron is taking its biggest step so far into AI infrastructure. On Monday, the company said it will build 2.67 gigawatts of natural gas power in West Texas to supply electricity directly to Microsoft’s data centers at the same location, under a 20-year contract. After the news, Chevron’s stock rose 0.1%, while Microsoft’s fell 2.1% as tech stocks dropped overall. Here’s what the deal includes and why it could be a strong financial move for Chevron.
The new power plants will be in West Texas, where there is plenty of natural gas from oil drilling. However, it has been hard to sell this gas because there aren’t enough pipelines to move it out of the state. Recently, Texas natural gas prices have even gone negative, so producers have had to pay others to take it. By signing a long-term deal with a major data center operator, Chevron avoids the spot market and turns unused gas into steady income.
The financial details are attractive. Chevron expects to earn annual returns in the mid-teens from this deal, which is much higher than its recent return on invested capital of about 6% in 2025. The 20-year contract gives Chevron steady cash flow and protects it from the usual ups and downs of oil and gas prices.
Most of the turbines for this project will come from GE Vernova, with some equipment supplied by a Caterpillar subsidiary. The plants are planned to run independently from the grid, but they might connect to it later. Power delivery should start in 2028, with capacity increasing over time. The companies haven’t made a final investment decision yet, but the signed agreement means the project will likely move forward once they get regulatory approval.
This deal gives Chevron a real presence in energy-to-data-center infrastructure, which is one of the fastest-growing energy markets as AI development speeds up.
