Title: Chevron and Microsoft Strike 20-Year Gas Deal for AI Data Centers Show: Barron's (written article) Guest: Avi Salzman (Barron's staff writer) Date: 2026-06-22 URL: https://www.barrons.com/articles/chevron-microsoft-natural-gas-ai-data-centers-131f6028 Length: written article (~3 min; no video; no timestamps) Note: Full text of the Barron's article, verbatim (UI chrome / ad markers removed). Written piece — no (mm:ss) cues, so the consolidated ticker pages carry the thesis via the "In plain English" callout rather than a timestamped excerpt.
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Key Points:
- Chevron signed a 20-year deal to provide 2.67 gigawatts of power from new natural gas plants in West Texas to Microsoft. - This agreement offers Chevron steady cash flows and estimated mid-teens annual returns, insulating it from commodity price volatility. - The project utilizes abundant West Texas natural gas, which currently faces weak market prices due to limited pipeline capacity.
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Chevron just made its biggest move yet into the data center game, signing a 20-year deal to provide power to Microsoft from new natural gas plants in Texas.
The transaction, announced on Monday, puts the oil giant on track to produce steady cash flows for years, insulating it from the boom-and-bust nature of oil and gas. It also gives it a strong foothold in the fastest-growing theme in energy, as investors look for new ways to buy into the AI boom.
The announcement wasn't doing much for Chevron stock on Monday, but it arguably should. It was up 0.1% on a day when energy names were trading flat on changing developments in the U.S.-Iran peace agreement. Microsoft stock was down 2.1% as tech names slipped on the day.
Chevron agreed to build 2.67 gigawatts worth of power capacity from natural gas power plants in West Texas, which will send electricity to Microsoft's data centers located at the same site. That's enough capacity to serve more than 1 million homes. The power plants can operate fully disconnected from the grid, though they may eventually be connected. Most of the turbines will be made by GE Vernova, supplemented by turbines made by a subsidiary of Caterpillar.
The announcement isn't a surprise. Chevron, working with investment firm Engine No. 1, has been talking about the project in general terms for more than a year.
The long-term benefits of this kind of business seem clear. Natural gas is ubiquitous in West Texas, where it's a byproduct of oil drilling.
Chevron has enormous natural gas reserves in the region. But market prices for gas are weak, because there are too few pipelines to get it out of the state. In the past few months, natural gas in Texas has traded for negative prices, meaning producers have to pay companies to take it away.
The oil giant has focused on signing longer-term deals for its gas so it doesn't have to sell into the spot market. The Microsoft contract is particularly lucrative. Chevron estimates it can make mid-teens annual returns from the agreement.
Chevron's return on invested capital, a similar metric, tends to vary from around 5% to 20%, depending on commodity prices. Last year, it was 6%, according to FactSet.
The companies haven't technically reached a final investment decision, but the Microsoft transaction makes it all but certain it will happen, assuming it gets the permits it needs. Power is expected to start flowing by 2028, with the project's capacity building up over time.
Write to Avi Salzman at avi.salzman@barrons.com