Chevron and Microsoft Sign 20-Year Deal for Co-Located Gas Plant to Power West Texas Data Center
June 23, 2026
Chevron and Microsoft Sign 20-Year Deal for Co-Located Gas Plant to Power West Texas Data Center
Chevron Corporation announced that its wholly owned subsidiary, Energy Forge One, has entered into a 20-year power purchase agreement with Microsoft to develop a co-located natural gas power generation facility in West Texas. The dedicated plant will supply electricity directly to a Microsoft-operated data center, marking a significant step in the race to secure reliable, large-scale energy for AI and cloud computing infrastructure.
The project, known as Project Kilby, is a collaboration between Chevron and Engine No. 1. It is expected to deliver approximately 2.67 gigawatts of capacity through a phased, modular approach, which Chevron says “enables incremental expansion over time.” The majority of this generation will come from large GE Vernova turbines and associated electrical infrastructure, with additional capacity provided by Caterpillar subsidiary Solar Turbines. First power delivery is anticipated in 2028.
“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation,” said Jeff Gustavson, Chevron president of New Energies. “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. This project links Chevron’s traditional strengths to emerging demand, creating differentiated value for our shareholders and the communities where we operate.”
By situating the power generation facility directly alongside the data center, Kilby is designed to deliver dispatchable electricity to Microsoft while minimizing strain on the regional grid. The plant will use non-potable, brackish groundwater instead of freshwater for its operations, and Chevron is also exploring the reuse of produced water from oil and gas activities. The facility will incorporate air emissions control technologies, including selective catalytic reduction systems to reduce NOx emissions, along with measures to mitigate noise and light impacts on surrounding communities.
The partnership builds on a broader initiative announced last year by GE Vernova, Chevron, and Engine No. 1 to create a new company aimed at delivering up to four gigawatts of reliable power for U.S. data centers. The collaboration was spurred by surging energy demand from AI development and data processing. The companies cited early actions of the Trump Administration “setting the critical foundation to encourage investment leveraging America’s energy abundance to enable America’s AI leadership.”
Initially, the projects are not designed to flow through the existing transmission grid. However, over time, surplus electricity could be sold back to the grid through future interconnects, providing additional capacity to the broader energy market without driving up costs for consumers. The first such projects, branded as “power foundries,” are expected to leverage seven GE Vernova 7HA natural gas-fired turbines, secured under a slot reservation agreement, on an accelerated timeline. These turbines are slated to serve co-located data centers in the U.S. Southeast, Midwest, and West regions.
“The rapid growth we’re experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably,” said Noelle Walsh, Microsoft president of Cloud Operations + Innovation. “Our agreement with Chevron helps ensure we’ll have dedicated, large-scale power to support the evolution and reliability of advanced compute. Through this partnership, we’re delighted to grow with and become a deeper part of the West Texas community.”
Source: power-eng
