Chevron and Microsoft have signed an agreement to develop a large-scale natural gas-powered facility in West Texas that will provide dedicated electricity to a Microsoft-operated data centre under a 20-year power purchase agreement.

The project, known as Project Kilby, is being developed by Chevron subsidiary Energy Forge One in collaboration with investment firm Engine No. 1.

Once completed, the facility is expected to deliver approximately 2.67 GW of power, making it one of the largest co-located natural gas power and data centre developments in the US.

The project will use a phased, modular construction approach and primarily rely on turbines supplied by GE Vernova, with additional generation capacity from Solar Turbines, a Caterpillar subsidiary.

By locating power generation directly alongside the data centre, the development aims to provide reliable electricity while reducing strain on the regional grid.

Chevron expects to make a final investment decision by the end of 2026, with first power delivery targeted for 2028.

The company said the project is expected to generate diversified cash flows and mid-teen returns.

Project Kilby is also projected to create nearly 2,000 jobs, generate more than $10 billion in state and local tax revenue, and support regional economic growth.

The facility plans to use brackish groundwater instead of freshwater and will incorporate advanced emissions-control technologies to reduce environmental impacts.

“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fuelling 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.”

“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.” -OGN/TradeArabia News Service