Chevron announced that Energy Forge One, a wholly owned subsidiary, signed an agreement with Microsoft to develop a co-located power facility in West Texas that will provide dedicated electricity to a Microsoft-operated data center under a 20-year power purchase agreement. Chevron and Engine No. 1 have been collaborating on the development, known as Project Kilby.
Kilby is expected to deliver approximately 2.67 gigawatts of capacity through a phased and modular buildout that enables incremental expansion over time. Most of the generation is expected to come from large GE Vernova turbines and associated electrical infrastructure, with additional capacity from Solar Turbines, a wholly owned subsidiary of Caterpillar.
Chevron said Kilby is positioned among the largest co-located natural gas power and data center developments in the U.S. The project is intended to support AI growth by using Permian natural gas to provide reliable and dispatchable power directly to Microsoft while helping reduce impacts on the regional grid.
The agreement represents an important milestone toward Chevron’s final investment decision, which is expected by the end of 2026, subject to the completion of other necessary conditions. First power delivery is anticipated in 2028. The project is targeting mid-teen returns and is expected to generate diversified cash flow that is independent of oil and gas price cycles.
Kilby is also expected to generate significant regional economic benefits, including more than $10 billion in state and local tax revenue, support for nearly 2,000 jobs, and broader economic growth. Chevron said the project plans to use non-potable brackish groundwater instead of freshwater for power plant operations and is working on solutions for reusing produced water from oil and gas operations.
The plant design is expected to include advanced air emissions control technologies, including Selective Catalytic Reduction systems designed to reduce NOx emissions, along with measures to minimize noise and light impacts on surrounding communities.
KEY QUOTES:
“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation. 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.”
Jeff Gustavson, President of New Energies at Chevron
“The rapid growth we’re experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably. 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.”
Noelle Walsh, President of Cloud Operations + Innovation at Microsoft
