Chevron and Microsoft have announced a 20-year agreement to power a large data center in West Texas. Known as Project Kilby and located in Reeves County, the development will be built in phases using a modular approach that allows for expansion over time. Chevron plans to develop 2.67 GW of power capacity, equivalent to the electricity needs of about 2 million US homes.
The project is intended to become one of the largest co-located natural gas power and data center facilities in the US by 2028, supporting continued growth in artificial intelligence (AI) infrastructure. The Houston-based oil and gas company will deploy gas turbines supplied by GE, along with units developed by Caterpillar subsidiary Solar Turbines.
Chevron notes that the share of businesses using AI has increased from 20% in 2017 to 88% in 2025. Microsoft continues to expand its AI portfolio through its Copilot platform and its 27% equity stake in OpenAI, developer of ChatGPT.
“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation,” Jeff Gustavson, president of Chevron’s new energies unit, said in a statement. “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.”
Chevron notes on its website that the behind-the-meter facility, which means it will operate independent of the Texas power grid, will use brackish groundwater instead of fresh water. The company will also use technologies to control emissions, reduce noise, and light impacts for the surrounding communities. Chevron also suggested that it may use produced water from its Permian Basin asset.
“The rapid growth we’re experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably,” Noelle Walsh, president of cloud operations and innovation for Microsoft, said in the announcement. “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.”
Financial details of the deal were not shared, but Chevron said it expected to generate more than $10 billion in state and local tax revenue and will create nearly 2,000 jobs.