Chevron and Microsoft Sign $9B West Texas Power-and-Compute Deal
Project Kilby, 2.67 GW behind-the-meter gas, 20-year PPA, Permian Basin, Engine No. 1 equity option
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Chevron and Microsoft announced a 20-year power purchase agreement on June 22, 2026, to co-locate a dedicated natural gas power plant with a Microsoft AI campus near Pecos in Reeves County, West Texas.
The development is named Project Kilby.
The project carries a total capital outlay estimated between $7 billion and $9 billion, with definitional dispersion between Bloomberg’s earlier estimate and a later figure from TD Securities.
Chevron plans a final investment decision before year-end 2026, with first power targeted for 2028.
Project Structure And Equity Holders
Project Kilby is structured around Chevron’s wholly owned subsidiary Energy Forge One LLC.
Energy Forge One partners with Joulent LLC, the energy venture of investment firm Engine No. 1. Joulent holds a 50 percent equity option in the project.
The site covers more than 2,000 acres in Reeves County at the heart of the Permian Basin.
TD Securities analyst Jason Gabelman estimated the capital outlay at approximately $9 billion, assuming predominantly project-financed capital at a developer internal rate of return of roughly 15 percent, which implies Microsoft pays approximately $150 per megawatt-hour under the PPA.
Generation Capacity And Compute Load
The plant will ramp to 2.7 GW of nameplate generation capacity, built in phases.
Microsoft will add approximately 2 GW of data center capacity over the next five to seven years to serve AI and cloud workloads.
The agreement creates more than 6,000 construction jobs and generates hundreds of permanent operational roles.
Equipment And Fuel Supply Chain
Generation will come primarily from GE Vernova 7HA gas turbines, with supplemental capacity from Solar Turbines, a Caterpillar subsidiary.
Chevron has committed orders for seven GE Vernova turbines.
These turbines carry multi-year backlogs.
Fuel will be sourced directly from Chevron’s Permian upstream production, with the company controlling the chain from wellhead to data center load.
Off-Grid Architecture And Next Steps
Project Kilby will operate 100 percent behind the meter, with no utility involvement and no ERCOT interconnection.
Jeff Gustavson, president of Chevron New Energies, stated there is no competition with local electricity consumers.
Chevron indicated it intends to channel surplus power into the grid over time to assist stabilization, though the foundational design is fully off-grid and dedicated.
The long-term expansion target is 5 GW into the 2030s.
Chevron’s final investment decision, guided to before year-end 2026, is the next milestone, with first power targeted for 2028.