Chevron Signs 20-Year Power Deal with Microsoft to Support West Texas Data Center
The co-located facility is expected to deliver approximately 2.67 gigawatts of capacity using Permian natural gas.
Chevron Corporation announced on June 22, 2026, that its wholly owned subsidiary, Energy Forge One LLC, has signed a 20-year power purchase agreement (PPA) with Microsoft Corporation to develop a co-located natural gas power facility in West Texas. The integrated energy company said the facility, known as Project Kilby, will deliver dedicated electricity to a Microsoft-operated data center.
Project Kilby is expected to deliver approximately 2.67 gigawatts of capacity, according to the company. Chevron said the facility will be built through a phased, modular approach that enables incremental expansion over time.
Jeff Gustavson, Chevron president of New Energies said, "AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation. 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."
The company said a majority of the generation will come from large GE Vernova turbines and associated electrical infrastructure. Additional capacity will be provided by Solar Turbines, a wholly owned subsidiary of Caterpillar Inc.
What the Project Delivers
By co-locating new power generation with the data center, the company said Kilby is designed to deliver reliable, dispatchable electricity directly to Microsoft while aiming to mitigate impacts on the regional grid. First power delivery is anticipated in 2028.
Chevron also said the project is targeting mid-teen returns and is expected to generate diversified cash flow independent of oil and gas price cycles. A Final Investment Decision (FID) is expected by the end of 2026, subject to the completion of other necessary conditions, the company said.
Noelle Walsh, Microsoft president of Cloud Operations and Innovation, said, "The rapid growth we're experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably. Our agreement with Chevron helps ensure we'll have dedicated, large-scale power to support the evolution and reliability of advanced compute."
According to the company, Project Kilby is expected to generate more than $10 billion in state and local tax revenue and support almost 2,000 jobs in the region.
On environmental design, Chevron said the plant will use non-potable, brackish groundwater instead of freshwater for operations. The design will also incorporate Selective Catalytic Reduction (SCR) systems to reduce nitrogen oxide (NOx) emissions including measures to minimize noise and light impacts on surrounding communities.
Chevron and Engine No. 1 have been collaborating on the project's development. The company said Kilby is positioned among the largest co-located natural gas power and data center developments in the United States.
Key Takeaways
- Chevron signs a 20-year power agreement with Microsoft for a new data center in West Texas.
- Project Kilby will deliver 2.67 gigawatts of capacity using Permian natural gas.
- First power delivery is projected for 2028, targeting reliable energy for Microsoft.
- The project aims for mid-teen returns and diversified cash flow independent of oil prices.
- Construction will utilize GE Vernova turbines and Solar Turbines for capacity expansion.