Chevron has announced a landmark agreement with technology titan Microsoft to supply natural gas-fired electricity to a massive artificial intelligence data center campus in West Texas.
The deal, announced Monday, will see Chevron develop a dedicated power facility known as Project Kilby to provide electricity directly to Microsoft's expanding data center operations in Pecos, Texas, for the next 20 years. The project is designed to support the soaring energy demands created by AI services and cloud computing platforms, including Microsoft's rapidly growing artificial intelligence infrastructure.
According to Chevron, Project Kilby is expected to deliver its first electricity in 2028 and eventually ramp up to approximately 2.67 gigawatts of generating capacity, making it one of the largest natural gas-powered data center projects in the United States.
The facility will be built in partnership with investment firm Engine No. 1 and will use turbines supplied primarily by GE Vernova, with additional generating equipment provided by Solar Turbines, a subsidiary of Caterpillar.
Major technology companies are scrambling to secure reliable power sources for increasingly energy-intensive AI systems. Industry leaders have warned that existing electrical grids may struggle to keep pace with the explosive growth in demand from hyperscale data centers used to train and operate advanced AI models.
Microsoft said the Pecos campus is expected to expand its data center capacity by roughly 2 gigawatts under the agreement. The company described the development as a multibillion-dollar investment that will unfold over the next five to seven years. The project is expected to create more than 6,000 construction jobs and hundreds of permanent operational positions once completed.
The deal also represents a significant strategic shift for Chevron. Traditionally focused on oil and natural gas production, the company is increasingly positioning itself as a direct provider of electricity for large-scale AI infrastructure.
By generating power at the same location as the data center, Chevron and Microsoft can avoid some of the bottlenecks associated with connecting large facilities to regional transmission networks. Project Kilby has been under discussion for months.
In March, Chevron, Microsoft and Engine No. 1 announced an exclusivity agreement tied to negotiations for a power generation and electricity supply arrangement in West Texas. At the time, Chevron said AI was driving unprecedented demand for "reliable, always-on power" and emphasized the importance of domestic energy resources in supporting that growth.
The project will draw heavily on natural gas produced in the Permian Basin, one of the world's most prolific oil and gas regions. The arrangement could help create a new source of demand for Permian gas, which has periodically suffered from transportation constraints and depressed prices due to limited pipeline capacity.
The move is part of a broader trend across the technology sector. Companies including Microsoft, Google, Amazon and other major cloud providers are increasingly exploring direct energy partnerships as AI-driven computing needs surge. Chevron expects to make a final investment decision on Project Kilby before the end of 2026.
