Microsoft signs 20-year natural gas power deal with Chevron for West Texas data center

Microsoft has signed a 20-year power purchase agreement with Chevron to supply natural gas for a major data center in West Texas, the companies announced this week. The deal covers one of the largest data centers in the United States, though exact capacity figures were not disclosed.

Chevron will deliver gas-fired electricity to the facility, which is expected to draw up to 500 megawatts of power at peak load, according to sources familiar with the project. That is enough to power roughly 400,000 homes.

From renewables to gas: a strategic pivot

The agreement represents a notable departure for Microsoft, which has publicly committed to being carbon negative by 2030 and has invested heavily in renewable energy and small modular nuclear reactors. The company has signed power purchase agreements for more than 10 gigawatts of solar and wind capacity globally since 2020.

But the explosive growth of AI workloads has forced a recalibration. Microsoft's data center energy consumption rose 34 percent year over year in 2025, driven largely by GPU clusters for training large language models. Natural gas offers the 24/7 reliability that intermittent renewables cannot guarantee.

• Chevron will build a dedicated natural gas pipeline and on-site generation infrastructure for the data center.
• The facility is located in the Permian Basin, giving Chevron direct access to its own gas production.
• Microsoft will purchase renewable energy credits to offset the emissions from the gas-fired power, the companies said.
• The deal includes provisions for carbon capture and methane leak monitoring to reduce environmental impact.
• Financial terms were not disclosed, but industry analysts estimate the contract value at several billion dollars over two decades.

Implications for Big Tech's climate goals

The Chevron deal underscores a growing tension between Big Tech's climate pledges and the immediate power needs of AI infrastructure. Google and Amazon have also signed gas-backed power agreements in the past year, though both continue to invest in renewables and nuclear.

Microsoft said it will continue to pursue long-term carbon-free energy sources, including advanced nuclear and geothermal, but acknowledged that natural gas is a necessary bridge. The company plans to retire the gas assets after 20 years and replace them with clean firm power.

Environmental groups criticized the deal. The Sierra Club called it a step backward for corporate climate leadership. Chevron, meanwhile, sees the agreement as a new revenue stream for its natural gas business, which has faced pressure from the energy transition.

What comes next: Microsoft is expected to announce similar gas-backed power deals for data centers in Virginia and Ohio later this year, as the company races to secure energy for its expanding AI footprint.