Global energy company Chevron has signed a partnership agreement with Microsoft to build a dedicated natural gas power facility next to the tech giant’s data center campus in Pecos, Texas, striking a 20-year agreement that could generate up to 2.67 gigawatts of electricity for AI workloads in the data center.
The Kelpie Power Project will bring together one of the largest U.S. energy producers with one of the largest buyers of data center capacity, continuing a trend of technology companies striving to provide reliable electricity for AI infrastructure. Microsoft expects the Pecos campus to add 2 gigawatts of data center capacity over the next five to seven years, according to Reuters.
Chevron will develop the project in cooperation with the investment company Engine No. 1 and GE Vernova, which will supply the majority of the gas turbines. Caterpillar’s Solar Turbines will also provide additional generating capacity. Initial power generation is targeted for 2028, with production increasing to 2.67 gigawatts over time.
Microsoft is betting on the power behind the counter
Microsoft described the investment in the data center as a multibillion-dollar commitment that would create more than 6,000 construction jobs and hundreds of permanent operational roles, according to Reuters.
The facility is located “behind the meter,” meaning Chevron will generate all of the electricity on site rather than feeding it through the regional grid. Daily Cole, chief commercial officer for Chevron New Energies, said the company can “deliver reliable and scalable supply in line with accelerating demand” with dedicated power designed specifically for data center customers, according to a Chevron report. newsroom mail.
This structure ensures that network constraints that have become the main bottleneck for data center expansion across the United States do not impact the project. By placing on-site generation alongside consumption, Chevron and Microsoft will jump the queue for interconnection requests and allow for delays that have stalled other projects.
Why natural gas and why Texas?
Chevron has extensive natural gas reserves in the Permian Basin, which extends west of Texas. The fuel provides a controllable, scalable power supply that can continually increase output to match changing computing loads, a requirement for AI workloads that have random and unpredictable spikes.
“AI does not represent a marginal increase in energy demand,” Jeff Gustafson, Chevron’s president of New Energy, said in the company’s announcement. “It fundamentally changes the range and speed that the power system has to deliver.”
Choosing natural gas over renewables or nuclear makes a lot of sense for Microsoft, as it could allow gas plants to be built faster than most alternatives. Chevron also operates the upstream supply chain for natural gas reserves in the region. Gustafson Mentioned Chevron “applies decades of project and energy system implementation experience” to the data center sector.
Chevron forecast
Chevron said it looks forward to reaching a final investment decision on the Kilby project before the end of 2026. The company has also identified additional sites where the combined energy model could operate, although there are no announced locations or timelines for this in particular.
to MicrosoftThe deal adds to a growing group of unconventional energy arrangements made in the past year. Technology companies, including Microsoft, Google and Amazon, have signed nuclear, geothermal and natural gas deals over the past 18 months, as traditional grid capacity remains short of growing demand for artificial intelligence.
The full-capacity Kilby project will rank among the largest combined natural gas power facilities in the country, according to the newsroom.
