Chevron and Microsoft Sign 2.67GW Data Centre Power Deal

Chevron has entered into a 20-year power purchase agreement with Microsoft to construct a dedicated gas-fired generation facility in West Texas. 

The development, named Project Kilby, is designed to provide 2.67GW of electricity directly to a new Microsoft data centre at Pecos. By securing a dedicated off-grid power source, the technology firm intends to reduce its reliance on the regional grid while ensuring a consistent energy supply for its expanding digital infrastructure. 

The plant will be constructed and operated by Energy Forge One, a subsidiary of Chevron. The energy company has developed the project in collaboration with Engine No. 1, an investment firm known for its 2021 boardroom campaign advocating for emissions reduction targets at ExxonMobil.

This partnership highlights a complex dynamic in the power sector as operators attempt to balance decarbonisation commitments with the intensive energy requirements of the technology sector.

Gas-fired plants provide baseline power that intermittent renewable sources – such as wind and solar – often struggle to guarantee without extensive battery storage.

Bypassing grid interconnection delays

The hyperscale sector is increasingly seeking dedicated generation capacity to support large-scale developments. This approach enables operators to circumvent the lengthy grid interconnection queues that frequently delay critical infrastructure projects across the country. 

Securing independent power generation allows technology firms to maintain momentum in their capacity expansion programmes. Dedicated power stations offer a direct route to energising campuses that house thousands of server racks.

"AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fuelling that transformation," says Jeff Gustavson, Chevron's President of New Energies.

Data centres require continuous power to operate advanced processing units and the sophisticated cooling systems necessary to prevent hardware failure. The scale of the West Texas project reflects the substantial electrical load associated with continuous AI workloads.

"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," says Jeff.

"This project links Chevron's traditional strengths to emerging demand, creating differentiated value for our shareholders and the communities where we operate.”

Scaling compute through partnerships

Microsoft continues to expand its footprint to accommodate rising customer demand for cloud services and AI tools. Securing physical space and energy capacity remains a priority for operators deploying high-density server environments.

"The rapid growth we're experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably," says Noelle Walsh, Microsoft's President of Cloud Operations and Innovation.

Operating outside the traditional grid network requires robust site selection and intensive local resource management to sustain a hyperscale operation.

"Our agreement with Chevron helps ensure we'll have dedicated, large-scale power to support the evolution and reliability of advanced compute," explains Noelle.

"Through this partnership, we're delighted to grow with and become a deeper part of the West Texas community.”

Design and local economic impact

The agreement represents a clear step toward Chevron reaching a Final Investment Decision on the project. That milestone is expected by the end of 2026, subject to various conditions being satisfied. If approved, the gas-fired plant is scheduled to go live by 2028.

Chevron expects Project Kilby to generate cash flow that is largely insulated from the cyclical nature of oil and gas prices. The financial framework underscores how traditional energy providers are diversifying their revenue streams through data centre partnerships.

The broader economic impact for West Texas includes significant projected contributions to the public purse over the lifespan of the agreement. Chevron believes the power plant will be capable of generating more than US$10bn in state and local tax revenues.

The company anticipates the project will create almost 2,000 jobs in the area during its lifecycle, providing sustained employment opportunities alongside the temporary construction phase.

Resource management is a central component of the facility design. The plant will draw on non-potable brackish groundwater for its operations to preserve local freshwater reserves. Industrial cooling systems require significant liquid volume, making alternative water sourcing a priority for developments in arid regions.

Chevron is currently exploring the reuse of produced water from its existing oil and gas operations to supply the site.

The technical specifications include Selective Catalytic Reduction systems intended to cut nitrogen oxide emissions from the gas-fired generation process. These control technologies are frequently deployed in industrial settings to manage exhaust outputs.

Additionally, the firm has committed to limiting noise and light impacts on nearby communities. The progression of Project Kilby remains dependent on Chevron clearing its Final Investment Decision later this year.