Chevron is setting its sights on more data center energy partnerships across the United States after announcing a landmark deal to supply power to a Microsoft facility in West Texas, a company executive revealed to Reuters.
Oil and gas giants like Chevron and Exxon Mobil are positioning themselves to cash in on the surging electricity demand driven by Big Tech’s rapid expansion of AI-powered data centers — leveraging their natural gas supplies and expertise in large-scale energy development.
Earlier this week, Chevron announced it had signed an agreement to build a natural gas power facility known as Project Kilby. The plant would have a capacity of 2.67 gigawatts and deliver dedicated electricity to Microsoft’s data center campus in Pecos, Texas. The project — a first for Chevron — would generate enough electricity to power a city comparable in size to San Francisco.
Jeff Gustavson, Chevron’s president of new energies, told Reuters in a Wednesday interview that the company sees strong potential for additional projects in West Texas, which sits within the Permian Basin — the nation’s leading oilfield and a region rich in natural gas.
Beyond Texas, Gustavson said Chevron is also interested in the Midwest, the Gulf Coast, and areas near Colorado’s Rocky Mountains. The company is additionally weighing data center deals in Utah, where it already operates a hydrogen facility.
“We’ll look at other parts of the country. We’ll look at it with Microsoft. We’ll look at it with other potential customers,” Gustavson said. “If we can put the right pieces together to meet our return thresholds, you can see more announcements over time.”
Project Kilby gives Chevron a separate revenue stream that isn’t tied to the ups and downs of commodity prices that affect its main business. Gustavson noted that Chevron and its partners are still working through the project’s design details and declined to reveal the estimated cost.
Industry analysts said this week it remains too early to determine whether powering data centers will become a significant revenue source for Chevron.
The company expects to make a final investment decision on the project before the end of this year. The first electricity generated by Kilby is anticipated in 2028, with the facility expected to take several more years to reach its full capacity. The project will require seven GE Vernova turbines along with multiple smaller turbines from Caterpillar, and has the potential to grow beyond its initial 2.67 gigawatt capacity.
