Chevron will fuel a massive Microsoft data center in West Texas with natural gas under a 20-year agreement, the oil major announced Monday.
The data center, called Project Kilby, is expected to consume nearly 2.7 gigawatts of electricity, equivalent to the power needed to run about 2 million homes.
Most of the electricity will come from large gas turbines supplied by Chevron’s partner, GE Vernova. Caterpillar will also provide turbines. The power is dedicated to the data center and will not be connected to the electric grid.
“There’s really no competition with local electricity consumers,” Jeff Gustavson, president of Chevron new energies, told CNBC. “In fact, over time, as we have excess power, we plan to push that into the grid to help stabilize it.”
Project Kilby has not started construction in Reeves County yet. Chevron expects to make a final investment decision on the project later this year. The data center would start receiving power in 2028.
Microsoft’s partnership with Chevron comes as it undertakes a massive buildout of data centers to power artificial intelligence applications. It plans $190 billion in capital expenditures this year, 61% more than in 2025.
Microsoft’s embrace of natural gas through a partnership with the oil industry shows a willingness to invest in fossil fuels to meet its electricity needs.
The rapid growth of AI “requires energy infrastructure that can scale quickly and reliably,” Noelle Walsh, Microsoft’s president of cloud operations and innovation, said in a statement Monday.
For its part, Chevron is positioned to quickly and reliably deliver natural gas from the Permian Basin, located in West Texas and southeastern New Mexico, to data centers at a competitive cost, Gustavson said in a statement.
Microsoft has invested primarily in renewable energy to offset carbon-dioxide emissions from its data centers. But now it’s also searching for alternative power sources than can more reliably meet the 24/7 demand of its data centers. It turned, for example, to nuclear power in 2024 by investing in the restart of the Three Mile Island nuclear plant in Pennsylvania.
