A 20-year agreement between Chevron and Microsoft will bring natural gas power to a massive new data center in West Texas, the oil company announced Monday. The deal marks a significant step toward fossil fuel use by a technology company that has long relied on renewable energy.
According to CNBC, the data center, called Project Kilby, is expected to consume nearly 2.7 gigawatts of electricity. That is roughly equivalent to the power needed to run about two million homes.
Most of the electricity will come from large gas turbines supplied by GE Vernova, a partner of Chevron. Caterpillar will also provide turbines. The power infrastructure will be built directly at the data center site rather than connected through a separate grid system.
Project Kilby has not yet broken ground. It is planned for Reeves County in west Texas. Chevron expects to make a final investment decision on the project later this year, and the data center would begin receiving power in 2028.
The natural gas itself will come from the Permian Basin, which spans west Texas and southeastern New Mexico. Jeff Gustavson, Chevron's president of new energies, said the company is positioned to deliver that gas quickly, reliably, and at a competitive cost.
Microsoft has been on an aggressive data center expansion to support artificial intelligence applications. The company plans $190 billion in capital expenditures this year, which is 61% more than it spent in 2025. The rapid growth of AI infrastructure has pushed the company to look beyond its traditional energy sources.
"The rapid growth of AI requires energy infrastructure that can scale quickly and reliably," said Noelle Walsh, Microsoft's president of cloud operations and innovation, in a statement Monday.
Microsoft has historically invested in renewable energy to offset carbon dioxide emissions from its data centers. But the 24-hour-a-day, seven-day-a-week power demands of modern AI infrastructure have pushed the company to look beyond wind and solar. In 2024, it invested in the restart of the Three Mile Island nuclear plant in Pennsylvania. The Chevron deal extends that search for reliable baseload power into the oil and gas sector.
The partnership puts one of the world's largest oil companies directly inside the data center buildout that is reshaping global energy demand. For Chevron, it represents a new kind of customer for Permian Basin production, one that needs a steady and guaranteed supply rather than commodity-market volumes.
Construction timing and the final scale of the project will depend on the investment decision Chevron expects to announce before the end of this year.
