Software giant Microsoft is negotiating exclusively with Houston-based oil and gas titan Chevron and investment firm Engine No. 1 about the development of a $7 billion power plant in West Texas that would supply electricity for a Microsoft data center campus.

The proposed natural-gas-fired plant initially would generate 2,500 megawatts of electricity, Bloomberg reports. The plant would be built near Pecos, a Permian Basin city, in an area where Microsoft plans to build a 2,500-megawatt data center campus on a 7,000-acre site.

A deal with Microsoft would secure a long-term customer for the plant’s output and help finance its construction, Bloomberg says. The project, expected to be producing power by 2030, still requires tax and environmental approvals as well an agreement to terms among Chevron, Engine No. 1, and Microsoft.

In a statement issued after Bloomberg reported the news, Chevron acknowledged it was in exclusive talks with Engine No. 1 and Microsoft, but the oil and gas company offered no details.

Chevron says the proposed plant “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. It pairs sustained, always-on demand from advanced computing with proven capability to design, build, and operate large-scale energy infrastructure.”

Development of gas-powered electrical plants for AI data centers represents a new—and potentially lucrative— business line for Chevron. In 2025, Chevron, Engine No. 1 and GE Vernova announced a partnership to produce natural gas for AI data centers in the U.S.

Chevron’s collaboration with Engine No. 1 has already secured an order for seven large natural gas turbines from GE Vernova, according to Bloomberg.

“Energy is the key to America’s AI dominance,” Chris James, founder and chief investment officer of Engine No. 1, said last year. “By using abundant domestic natural gas to generate electricity directly connected to data centers, we can secure AI leadership, drive productivity gains across our economy, and restore America’s standing as an industrial superpower.”