Chevron and Engine No. 1 Win 20-Year Deal to Power Microsoft West Texas Data Center

Chevron and Engine No. 1 secured a 20-year agreement to supply natural gas-based electricity to a Microsoft data center project in West Texas. The plant and the data center will be co-located.

The 2.67-gigawatt facility is called Project Kilby. Most of its capacity will come from GE Vernova turbines, with the remainder enabled by Caterpillar's Solar Turbines.

The partners expect to make a final investment decision this year and start generation from the project in 2028.

Jeff Gustavson said the Microsoft project had already been factored into Chevron's 2026 financial guidance, according to Oil & Gas Journal. "You could see this being a business over time that could be in the billions of dollars in terms of free cash flow," Gustavson said.

In lieu of freshwater, Kilby plans to use non-potable, brackish groundwater sources for power plant operations. The water approach addresses one constraint on large thermal generation sited in an arid region.

The co-location design ties power supply directly to the computing load it serves, removing the need to route generation through the wider transmission grid. That structure links a gas producer's output to the electricity demand growth driven by data center expansion.

The 20-year term fixes the offtake horizon well beyond the 2028 first-power date. Chevron's guidance treatment signals the company views the arrangement as a defined revenue stream rather than a speculative venture.