Chevron to Supply Natural Gas to Microsoft's 2.7-Gigawatt Project Kilby Data Center in West Texas

Chevron and Microsoft have entered a 20-year agreement under which the oil major will supply natural gas to a massive data center in West Texas, the companies announced Monday, underscoring the lengths to which technology firms are willing to go to secure reliable power for artificial intelligence infrastructure.

The facility, called Project Kilby, is expected to consume nearly 2.7 gigawatts of electricity — the equivalent of approximately 2 million homes. A majority of that power will come from large gas turbines provided by GE Vernova, Chevron's partner in the arrangement. Caterpillar will also supply turbines. All power infrastructure will be located directly at the data center site.

Project Kilby is slated for Reeves County and has not yet broken ground. Chevron expects to make a final investment decision on the project later this year, with the data center set to begin receiving power in 2028.

"The rapid growth of AI requires energy infrastructure that can scale quickly and reliably," said Noelle Walsh, Microsoft's president of cloud operations and innovation, in a statement Monday.

Jeff Gustavson, Chevron's president of new energies, said the company is positioned to deliver natural gas from the Permian Basin to data centers quickly and at a competitive cost.

The deal reflects Microsoft's willingness to partner with the fossil fuel industry to meet its round-the-clock electricity demands, even as the company has historically leaned on renewable energy to offset carbon-dioxide emissions from its data centers. In 2024, Microsoft moved into nuclear power through an investment in the restart of the Three Mile Island plant in Pennsylvania.

Microsoft plans $190 billion in capital expenditures this year, a 61% increase over 2025, as it accelerates a broad buildout of data center capacity to support AI applications.

The Project Kilby announcement arrives amid a national conversation about the energy and community costs of large-scale data center expansion. In Pennsylvania, Governor Josh Shapiro — who announced a $20 billion Amazon data center deal in June 2025, the largest economic development transaction in the state's history — has faced mounting public resistance to such facilities.

An Emerson College poll of 2,000 Pennsylvania adults released in December found that 42% of respondents said they would oppose a data center in their community, compared with 34% who said they would support one. Shapiro last month introduced what he called "strict guardrails to hold data center developers accountable," requiring companies to certify they will either supply their own energy or cover 100% of the costs to keep local utility rates stable, among other conditions.

Site selection consultants say community pushback is increasingly influencing where companies choose to build. "An early screening mechanism for us is places that are starting to really push back on economic development, so we're factoring that in," said Larry Gigerich, managing executive director of Ginovus and chairman of the Site Selectors Guild.

Tom Stringer of Stringer Site Selection and Incentives put it plainly: "The biggest thing, I think, is speed to market. We're really only looking at those states that have ready sites to go, that are pre-permitted, infrastructure in place, incentives lined up."

Pennsylvania Secretary of Community and Economic Development Rick Siger pushed back on the idea that Shapiro's new standards would slow development. "We are not adding a regulatory layer. We are saying, 'Here's what we think good is,'" Siger said in an interview.

With Chevron now anchoring power supply for one of Microsoft's largest planned facilities, how regulators, communities, and energy markets respond to the West Texas project will likely shape the template for AI-driven data center development for years to come.

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