Chevron will power Microsoft's massive data center using natural gas

Oil giant Chevron announced on Monday, June 22, that under a 20-year agreement, it will supply natural gas-generated electricity to a major Microsoft data center in West Texas. This facility could become one of the largest data centers in the U.S., according to Bloomberg.

The Chevron project, dubbed Project Kilby, will supply nearly 2.7 gigawatts of power to Microsoft’s data center campus in Texas—equivalent to the energy consumption of approximately 2 million homes, according to CNBC. According to Bloomberg’s calculations, this capacity will be enough to power more than 530,000 households in Texas.

Under the proposed project, several large GE Vernova gas turbines are expected to be installed directly at the Microsoft data center site. Chevron will supply gas for them from the Permian Basin—the largest oil field in the Americas. The turbines will supply power to the data center. They will account for the bulk of the power generation, according to a Chevron press release. Additional capacity will be provided by Solar Turbines, a subsidiary of Caterpillar.

The project will generate its own electricity, which means it will not draw on the public grid, said Jeff Gustavson, Chevron’s president of new energy initiatives, in an interview with Bloomberg.

Investment in Project Kilby will total several billion dollars and will be spread over the next five to seven years, Microsoft noted in a separate statement. According to the company, the project will create more than 6,000 jobs in the construction sector and hundreds of permanent positions for support staff.

Construction on Project Kilby has not yet begun. Chevron expects to make a final investment decision on the project by the end of this year, the company said in a press release, noting that it also expects: Kilby will generate a diversified cash flow that is independent of oil and gas price cycles, which will further ensure sustainable returns for shareholders. The first delivery of electricity to the Microsoft facility is scheduled for 2028.

Chevron shares rose 0.5% in trading on June 22, while Microsoft shares—amid a broad sell-off of technology stocks—fell 2.5%.

Microsoft's partnership with Chevron comes amid a massive expansion of the tech giant's data center network to support artificial intelligence-based applications, CNBC notes. This year, Microsoft plans to invest $190 billion in capital expenditures, a 61% increase compared to 2025.

Previously, Microsoft had invested primarily in renewable energy sources to offset carbon dioxide emissions from its data centers. However, the IT giant is now seeking power sources that can more reliably support the operation of its data centers. For example, in 2024, the corporation turned to nuclear energy, investing in the restart of the Three Mile Island nuclear power plant in Pennsylvania, the TV channel notes. The possibility of postponing or abandoning the goal of fully meeting its electricity consumption through purchases from renewable sources, is something Microsoft is exploring amid an intense race among big tech companies to ensure their data centers have enough energy to meet the demands of AI, Bloomberg reported in May.

Microsoft's partnership with Chevron in the natural gas sector demonstrates its willingness to invest in fossil fuels to meet its electricity needs, according to CNBC.

This article was AI-translated and verified by a human editor