Chevron (CVX) has entered into an exclusivity agreement with Microsoft (MSFT) and Engine No. 1 to develop a massive data center in West Texas. The project is part of a trend East Daley Analytics has flagged: using AI infrastructure to create a new gas demand corridor in Texas.
Chevron first announced the data center project at its Investor Day in November ’25, stating that it was targeting 2.5 GW of initial capacity for an unnamed client. On March 31, CVX confirmed that Microsoft is the partner behind the project. No commercial terms have been finalized yet, the company said.
Chevron and Engine No. 1 had earlier reached a partnership to build natural gas-fired plants next to data centers, using turbines supplied by GE Vernova. At its November Investor Day, CVX said the partners were targeting FID on the project by early 2026 and to begin service in 2027.
The opportunity shows how AI development is creating new gas demand in Texas and supporting infrastructure expansions. Along with Chevron’s venture, the $550B Stargate Project is targeting a 5 GW data center in Abilene in central Texas, and Energy Transfer (ET) has agreement to supply gas to the HyperGrid project in Amarillo. ET has also cited demand-side shippers like data centers for supporting its Hugh Brinson Pipeline to Dallas-Fort Worth.
In the ‘Data Center’ dashboard in Energy Data Studio, East Daley is tracking over 53 GW of announced generation capacity for data centers in Texas (see figure). In a high case, these projects could support up to 8.4 Bcf/d of new gas demand; our risked assessment forecasts 3.4 Bcf/d of likely demand.
In Chevron’s case, the producer is positioning to monetize Permian gas directly through behind-the-meter power sales. The initial 2.5 GW of capacity could potentially expand to 5 GW. That setup enables Chevron to move beyond selling molecules into a volatile basin market, and instead convert low-cost Permian gas into premium electricity sales.
Chevron is an example of how producer-backed support can directly capture upside from the data center boom. Based on an initial 2.5 GW of project capacity, East Daley estimates 350-410 MMcf/d of new baseload demand. With its Engine No. 1 partnership, CVX is testing a model that can be repeated in other markets for turning gas supply into steady power sales.
Bottom Line: Chevron’s data-center power complex is an example of the Texas AI corridor thesis East Daley has outlined. CVX could capture that opportunity by converting Permian gas into premium power sales, creating new demand within the basin. – Jaxson Fryer Tickers: CVX, ET, MSFT.
Download Part II of East Daley’s Permian Basin White Paper Series
The Permian Basin’s next big buildout is already taking shape, but this time the driver isn’t crude oil. In The Permian Basin at a Crossroads: Why This Pipeline Boom is Different, East Daley Analytics’ latest white paper reveals how gas demand from AI data centers, utilities and LNG exports is rewriting the midstream playbook in the leading US basin. Over 10 Bcf/d of new capacity and $12 billion in investments are reshaping flows, turning the Permian into a gas powerhouse even as rigs decline. Read Part II: Why This Pipeline Boom is Different
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