Chevron Microsoft Power Deal Backs Project Kilby
Chevron Microsoft power deal aims to convert Permian gas into contracted power, diversifying Chevron's cash flow and supporting shareholder returns.
KEY TAKEAWAYS
- Chevron signed a 20-year PPA with Microsoft to develop Project Kilby in West Texas.
- Kilby targets approximately 2.67 GW via phased modular build with first power expected in 2028.
- Chevron said Kilby targets mid-teen returns and will diversify cash flow away from commodity cycles.
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Chevron Corporation (CVX) said in a Business Wire release on June 22, 2026, that it signed a 20-year power-purchase agreement with Microsoft Corp. (MSFT) to develop Project Kilby, a co-located natural-gas power plant and Microsoft-operated data center campus in West Texas. The deal aims to diversify Chevron’s cash flow and target mid-teen returns.
Deal Terms and Timeline
Chevron will develop Project Kilby through its wholly owned subsidiary Energy Forge One LLC on land in Reeves County near Pecos, in the Permian Basin. The agreement sets a Final Investment Decision (FID) target by the end of 2026, with first power expected in 2028. The project will be built in phases, allowing modular expansion toward approximately 2.67 gigawatts (GW) of dedicated capacity.
Scale, Technology, and Fuel
Kilby’s generation will rely mainly on large GE Vernova turbines, supplemented by Solar Turbines, a Caterpillar subsidiary. The facility is designed as a co-located, on-site natural-gas plant delivering electricity directly to Microsoft’s campus, rather than feeding the full load into the regional grid. This setup aims to reduce strain on local power networks. The plant will use natural gas sourced from Chevron’s existing Permian production.
Chevron’s engineering plans include using non-potable brackish groundwater for operations, Selective Catalytic Reduction systems to lower nitrogen oxide (NOx) emissions, and measures to minimize noise and light impacts around the site. The company has collaborated with Engine No. 1 and its energy platform Joulent to establish the generation capacity.
Financial Returns and Local Impact
Chevron targets mid-teen returns for Kilby and views the project as a source of diversified cash flow less sensitive to oil and gas price cycles. The company projects the development will generate more than $10 billion in state and local tax revenue and support nearly 2,000 jobs. Microsoft has said the campus will expand its data-center capacity by about 2 GW, represent a multi-billion-dollar investment over five to seven years, and support over 6,000 construction jobs plus hundreds of permanent operations roles.
Chevron describes Kilby as among the largest co-located natural-gas power and data-center developments in the U.S., presenting it as a model for providing dispatchable, contract-backed power to meet large computing loads and support domestic AI infrastructure growth.
