Chevron Corporation signed a 20-year power purchase agreement with Microsoft to supply electricity from a co-located natural gas-fired facility in West Texas. The project, known as Project Kilby, targets up to 2.67 gigawatts of capacity for a Microsoft data center campus in Reeves County near Pecos. First power is slated for 2028, with phased buildout extending into the 2030s.
The agreement marks Chevron’s entry into dedicated power supply for hyperscale AI infrastructure. Energy Forge One LLC, a wholly owned Chevron subsidiary, will develop the plant in partnership with Engine No. 1. The facility will draw on local Permian Basin gas production and bypass the regional ERCOT grid for direct delivery to the data center.
Capacity comes primarily from seven large GE Vernova turbines plus additional units from Solar Turbines, a Caterpillar subsidiary. The modular design supports incremental expansion. Microsoft gains a dedicated, dispatchable power source sized to support advanced AI compute workloads.
Chevron President of New Energies Jeff Gustavson highlighted the company’s positioning: “Chevron is uniquely positioned to deliver power to customers with certainty, speed and at a competitive cost, leveraging Permian natural gas and our proven execution capabilities.” Microsoft Cloud Operations President Noelle Walsh noted the need for scalable, reliable energy infrastructure to match AI and cloud growth.
The site spans more than 2,000 acres. Project economics target mid-teen returns and diversified cash flow insulated from oil and gas price swings. Final investment decision is expected by year-end 2026, subject to permits and other conditions.
Local impacts include more than $10 billion in projected state and local tax revenue and support for nearly 2,000 jobs. The plant will use brackish groundwater rather than freshwater and incorporate emissions controls such as selective catalytic reduction for NOx. Chevron is also advancing produced-water reuse options from its oil and gas operations.
Just days after the announcement, Reuters reported that Chevron is scouting additional data-center power projects across the U.S. Gustavson told the wire service the company sees opportunities in West Texas, the Midwest, Gulf Coast, Rockies and Utah. “We’ll look at other parts of the country. We’ll look at it with Microsoft. We’ll look at it with other potential customers,” he said. Reuters, June 26, 2026.
WSJ coverage described the deal as cementing Chevron’s lead among major oil companies pursuing data-center demand. The on-site plant will run on Chevron’s local gas output rather than drawing from the broader Texas grid. Wall Street Journal, June 22, 2026.
Chevron’s original release details the 2.67 GW scale and turbine suppliers. Chevron, June 22, 2026. Earlier Reuters reporting confirmed the 20-year term and Pecos location. Reuters, June 22, 2026.
Analysts note the arrangement gives Chevron a new revenue stream less tied to commodity cycles. The scale—enough power for roughly two million homes—illustrates how AI demand is reshaping energy procurement for both tech and energy majors. Similar co-located gas projects are under discussion industry-wide as grid interconnection queues lengthen.
Chevron has positioned New Energies to bridge traditional upstream strengths with emerging power needs. The Kilby structure—gas supply, on-site generation, long-term offtake—offers a template other producers may follow. Execution risk remains on permitting, turbine delivery and construction timelines, yet the 20-year commitment provides visibility rare in power markets.
Microsoft’s broader data-center buildout continues to accelerate. The company has signaled multi-gigawatt capacity additions across several regions. Securing firm power ahead of full grid reliance reduces delivery risk for its AI roadmap.
Project Kilby sits at the intersection of two sectors long viewed as separate. Energy companies now compete directly for hyperscaler load while tech firms evaluate behind-the-meter generation. The deal’s size and duration signal both parties expect sustained demand growth through the decade.
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