en.Wedoany.com Reported - Microsoft has signed a 20-year power purchase agreement with Chevron, which will build a dedicated natural gas power generation facility for it in West Texas, addressing the bottleneck in reliable power access speed faced by hyperscale companies in their AI infrastructure planning.
The project, named Project Kilby, will be built and operated by Chevron subsidiary Energy Forge One, directly powering Microsoft's data centers to reduce reliance on the regional grid. Chevron is developing the project in partnership with investment firm Engine No. 1.
Jeff Gustavson, President of Chevron New Energies, stated that AI is reshaping the global economy, and abundant, reliable energy is key to this transformation. Leveraging its Permian natural gas resources and execution capabilities, Chevron can supply customers with certainty and competitive costs. Noelle Walsh, President of Microsoft Cloud Operations & Innovation, noted that the rapid growth of AI and cloud businesses requires energy infrastructure that can scale quickly, and this agreement ensures the supply of dedicated large-scale power.
The agreement brings Chevron closer to a Final Investment Decision on Project Kilby, expected by the end of 2026, subject to further conditions. Chevron targets a mid-teen return on the project and expects its cash flow to be largely insulated from oil and gas price cycles. The facility is planned to begin operations in 2028, is expected to generate over $10 billion in tax revenue for the state and local area, and provide nearly 2,000 local jobs.
In terms of resource utilization, the plant will use non-potable brackish groundwater instead of freshwater and will explore reusing produced water from existing oil and gas operations.
The plant design includes Selective Catalytic Reduction systems to reduce nitrogen oxide emissions and commits to limiting noise and light impacts. These specifications reflect common design considerations for facilities seeking regulatory approval at the intersection of data center expansion and resource constraints in the region.
Project Kilby represents a new model where hyperscale companies increasingly seek dedicated off-grid power generation to bypass lengthy grid interconnection queues to meet the high electricity demands of AI workloads. This arrangement also highlights the real-world tension within the industry between decarbonization commitments and expanding natural gas power generation.
