Oil Meets Bytes in Chevron’s Massive Texas Power Play

Chevron and Microsoft sign a $7 billion, 20-year power deal for a Texas gas plant to fuel AI data centers

29 Jun 2026

Chevron and Microsoft have signed a landmark 20-year power purchase agreement for Project Kilby, a 2.67-gigawatt natural gas plant near Pecos, Texas. Valued at $7 billion, the co-development with Engine No. 1’s Joulent signals a massive structural shift. Oil majors are rapidly repositioning themselves as AI infrastructure companies.

Securing long-term revenue from tech giants scrambling for dedicated power has become a massive strategic priority. Located near the Waha Hub, Texas’s key Permian gas trading point, Project Kilby carries a built-in supply advantage. Chevron’s Daniel Droog confirmed that proximity to Waha enables profitable gas supply integration, reducing cost uncertainty across the plant’s multi-decade life.

GE Vernova is expected to supply turbine equipment, adding another heavyweight to the partnership. A final investment decision is expected by the end of 2026, with first power targeted for 2028. The timeline is urgent. That schedule reflects the immense pressure tech firms feel as AI workloads strain existing grid capacity across the United States.

This demand pushes operators to secure firm, dispatchable generation that wind and solar simply cannot guarantee. Natural gas, deliverable on demand, has become the bridging solution data center operators are willing to commit to for decades. For Chevron, the deal represents far more than a simple energy sale.

Locking in 20 years of contracted revenue from a counterparty of Microsoft’s scale transforms the risk profile of a capital-intensive asset. It opens a replicable model for future AI-linked infrastructure plays. Energy investors are watching closely, as similar arrangements could reshape how upstream producers monetize natural gas in an era defined by compute demand.

Project Kilby may well mark the moment traditional energy and digital infrastructure became inseparable industries. Competitors on both sides of that divide are already watching, and the race to replicate this model is likely already underway.