Chevron, Microsoft Sign 20-Year Power Deal for West Texas AI Data Center
Chevron subsidiary Energy Forge One LLC has signed a 20-year power purchase agreement with Microsoft to develop a co-located natural gas power facility, known as Project Kilby, that will supply electricity to a Microsoft-operated AI data center in West Texas, according to a Chevron press release. The project is expected to deliver approximately 2.67 gigawatts of capacity, built in phases to allow incremental expansion.
Most of the generation capacity will come from large GE Vernova turbines and associated electrical infrastructure, with additional capacity from Solar Turbines, a Caterpillar subsidiary. Chevron says the development positions Kilby among the largest co-located natural gas power and data center projects in the country, leveraging Permian natural gas supply. The company expects to reach a Final Investment Decision by the end of 2026, with first power delivery targeted for 2028. Chevron projects the project will generate more than $10 billion in state and local tax revenue and support almost 2,000 jobs.
Kilby is designed to use non-potable, brackish groundwater rather than freshwater for power plant operations, and Chevron says it is also working to advance reuse of produced water from its oil and gas operations. The plant will incorporate Selective Catalytic Reduction systems to reduce NOx emissions along with noise and light mitigation measures.
What It Means for Subcontractors
- E&I contractors and turbine-installation crews in the Permian Basin should track the FID timeline: Chevron expects a decision by year-end 2026, with construction mobilization likely to follow for a 2028 first-power target.
- The turbine order, split between GE Vernova’s large-frame units and Caterpillar’s Solar Turbines line, points to two distinct scopes of commissioning and electrical work — worth flagging for subs specializing in either large-frame or smaller modular gas turbine installations.
- Civil and site-development subs should note the brackish-groundwater design, which will require water treatment and handling infrastructure atypical of a standard freshwater-cooled gas plant, and may open produced-water-reuse subcontract scopes tied to Chevron’s existing Permian operations.
- The phased, modular build-out approach signals recurring subcontract packages over multiple years rather than a single mobilization, giving West Texas field service firms a longer runway to position for scope as phases come online.
