Chevron signs 20-year Microsoft power deal for West Texas AI project
(WO) — Chevron has signed a 20-year power purchase agreement with Microsoft to supply electricity from a planned natural gas-fired power facility in West Texas, marking a major step in the growing connection between U.S. energy production and artificial intelligence infrastructure.
The agreement calls for Chevron subsidiary Energy Forge One to develop a co-located power facility that will provide dedicated electricity to a Microsoft-operated data center under what the companies describe as one of the largest natural gas-powered data center developments in the United States.
The project, known as Kilby, is being developed in partnership with investment firm Engine No. 1 and is expected to deliver approximately 2.67 GW of generating capacity through a phased expansion approach. The facility will be located in West Texas and fueled primarily by natural gas, leveraging nearby Permian basin resources.
Chevron said the project is expected to reach final investment decision by the end of 2026, subject to remaining approvals and conditions. Initial power delivery is targeted for 2028.
A majority of generation capacity will come from GE Vernova gas turbines and associated electrical infrastructure, supplemented by equipment from Caterpillar subsidiary Solar Turbines.
The project is designed to provide dedicated, dispatchable power directly to Microsoft's data center operations while minimizing impacts on the regional power grid. Demand for electricity from artificial intelligence, cloud computing and data center growth has emerged as a major driver of new natural gas-fired generation projects across the United States.
"AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation," said Jeff Gustavson, president of Chevron New Energies.
Microsoft said the long-term agreement will help support the rapid growth of AI and cloud-computing services while ensuring access to reliable power supplies.
Beyond supplying electricity, Chevron estimates the development could generate more than $10 billion in state and local tax revenue and support nearly 2,000 jobs. The company said the facility plans to utilize non-potable brackish groundwater for operations and is evaluating opportunities to reuse produced water from oil and gas operations.
The agreement represents Chevron's latest effort to capitalize on rising power demand from data centers while creating revenue streams less directly tied to oil and gas commodity prices.
