Most of the power will come from large GE Vernova turbines, and the facility is expected to be one of the biggest gas-powered data center developments in the U.S.
“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation,” Jeff Gustavson, Chevron’s president of New Energies, said in the release.
Chevron has signed the agreement with Microsoft but has not yet made a final investment decision on the project, which it expects to make by the end of 2026. The Houston-based energy giant says it is targeting mid-teen returns and expects the facility to begin supplying electricity in 2028.
“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,” Gustavson said. “This project links Chevron’s traditional strengths to emerging demand, creating differentiated value for our shareholders and the communities where we operate.”
The company is framing the project as a way to “generate diversified cash flow,” signaling a broader bet on AI-driven electricity demand beyond Chevron’s traditional dependence on oil and gas price cycles.
Microsoft, which operates one of the world’s largest global data center networks, said the agreement follows rapid growth in AI and cloud services driven by customer demand. The tech company said it needs 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,” Noelle Walsh, Microsoft president of Cloud Operations + Innovation, said in the release. “Through this partnership, we’re delighted to grow with and become a deeper part of the West Texas community.”
Chevron estimates Kilby will generate more than $10 billion in state and local tax revenue and create about 2,000 jobs. The company also said the plant will be designed with advanced emissions-control technology, use non-potable brackish groundwater for operations and minimize noise and light impacts.