In a major move underscoring the surging energy demands of the AI boom, Chevron Corporation announced a landmark 20-year power purchase agreement with Microsoft to supply dedicated electricity to a large-scale data center in West Texas.
The deal, announced June 22, 2026, involves Energy Forge One LLC (a Chevron subsidiary) developing Project Kilby — a co-located natural gas-fired power facility expected to deliver approximately 2.67 gigawatts of capacity. The project will be built in a phased, modular approach, positioning it among the largest of its kind in the United States.
Generation will primarily come from large GE Vernova turbines and supporting infrastructure, with additional contributions from Solar Turbines (a Caterpillar subsidiary). The facility will leverage Chevron’s Permian Basin natural gas resources, providing reliable, dispatchable power directly to Microsoft’s operations while aiming to minimize strain on the regional grid.
“This project links Chevron’s traditional strengths to emerging demand, creating differentiated value for our shareholders,” said Jeff Gustavson, Chevron president of New Energies. Microsoft’s Noelle Walsh, president of Cloud Operations + Innovation, highlighted the need for scalable, reliable energy to support AI and cloud growth.
Project Details & Timeline
Capacity: ~2.67 GW (phased expansion potential).** First Power**: Targeted for 2028.** FID**: Expected by end of 2026.** Returns**: Mid-teens targeted, with cash flows largely independent of commodity price volatility.** Economic Impact**: Projected to generate more than**$10 billion** in state and local tax revenue and support nearly2,000 jobs.
The co-location strategy addresses a key industry challenge: powering hyperscale data centers amid grid constraints. It uses non-potable brackish groundwater and explores produced water reuse, with advanced emissions controls (including Selective Catalytic Reduction for NOx).
This partnership represents Chevron’s deepening push into power generation and new energies while capitalizing on its core upstream assets. For Microsoft, it secures long-term dedicated capacity for AI infrastructure expansion in a strategic location.
The deal highlights the broader convergence of Big Tech and traditional energy majors as data center demand is forecast to strain U.S. power supply in the coming years. Further details are expected as Chevron moves toward a Final Investment Decision.