It looks like the progress on the Xbox 360 port of Half Life 2 is coming along nicely. VALVe has announced that the Source engine, the one Half Life 2 uses, is now available for other Xbox 360 developers as well. Developers are now able to license the engine for their own games and it even comes with full Xbox Live support. This is a welcome change to all the Unreal engine usage in all of the major 360 titles.

Source, the technology that powered Valve’s Half-Life 2, is already the benchmark game technology on Microsoft’s Windows platform, offering state of the art performance in graphics, networking, artificial intelligence, physics simulation and more. The version of Source, available for Xbox 360, is optimized to utilize the platform’s advance graphics hardware and offer full support for Xbox Live.

“The combination of Source and the Xbox 360 provides game designers throughout the industry the chance to create powerful entertainment experiences,” said Gabe Newell, president and co-founder of Valve. “Whether they’re pursuing a traditional FPS, RTS, RPG or delving into new genres, Source and the Xbox 360 are designed to offer the flexibility and tools to allow designers to pursue any design imaginable.”

Fun fact; in Dean Takahashi’s book, Xbox 360 uncloaked, he tells that Microsoft was given a choice between VALVe and Epic to come up with a big first party published title for the Xbox 360. Microsoft chose to go with Epic to develop Gears. That led to the U3 engine getting ported to the Xbox 360 which allowed other developers to license the engine. And that’s the reason we see so many 360 games using the Unreal 3 engine today.