Microsoft has signed a 20-year agreement with Chevron to support an AI data center campus in West Texas, highlighting the growing intersection of energy infrastructure and AI development.
The project, known as Project Kilby, is planned for Reeves County in the Permian Basin region and is expected to require approximately 2.7 gigawatts of electricity when fully built. That level of power consumption is roughly comparable to the electricity needs of about two million US homes.
The partnership is one of the largest instances of a tech company securing dedicated energy generation to support AI operations. Rather than relying solely on the regional grid, the project will pair a large-scale data center campus with power generation infrastructure built on-site.
Most of the electricity will be generated by natural gas turbines supplied by GE Vernova, with additional turbine capacity provided by Caterpillar’s Solar Turbines business. Chevron is partnering with energy company Joulent, which is backed by investment firm Engine No. 1, to develop the generation facilities.
Chevron expects to make a final investment decision later this year after completing permitting requirements. Initial power delivery is targeted for 2028, with additional capacity expected to come online through the following decade.
Diversified Energy Strategy
Microsoft is one of the AI industry’s most aggressive investors in infrastructure. The company plans approximately $190 billion in capital expenditures this year, a substantial increase over the previous year, much of it directed toward cloud and AI expansion.
The company’s energy strategy has become diversified as those infrastructure requirements grow. Microsoft has historically relied heavily on renewable energy purchases and carbon-reduction initiatives. But more recently it has also pursued power sources capable of delivering around-the-clock generation. In 2024, the company supported efforts to restart the Three Mile Island nuclear facility in Pennsylvania. The Chevron agreement adds large-scale natural gas generation to that evolving mix.
For Chevron, the project creates a new avenue for growth beyond traditional oil and gas production. The company will supply natural gas from its Permian Basin operations directly into the power generation facilities, creating a vertically integrated model that converts locally produced fuel into electricity for AI computing.
The arrangement also offers Chevron a more predictable revenue stream than commodity markets alone. Long-term power contracts tied to major tech customers provide stable demand while leveraging the company’s expertise in large energy development.
Another important aspect of Project Kilby is its co-location design. Building power generation adjacent to the data center can reduce pressure on regional transmission networks and accelerate deployment timelines. As utilities across the country face mounting requests from AI operators, co-located generation is viewed as a practical way to bring new capacity online more quickly.
The project may also serve as a blueprint for future collaborations between energy companies and major cloud providers. Chevron and Engine No. 1 previously outlined ambitions to develop multiple gigawatts of power capacity for data center customers. If AI adoption continues at its current pace, Project Kilby could be the first of several major energy campuses built specifically to support next-gen computing.
