Chevron inks 20-year natural gas supply deal with Microsoft tied to Texas AI data center plans

Chevron has signed a long-term natural gas deal with Microsoft that is connected to Microsoft’s plans for an AI-focused data center in West Texas, according to a report published by Yahoo Finance.

The report says the arrangement runs for 20 years and links the energy supply to a new generation project called Project Kilby, described as a 2.67-gigawatt natural gas plant in Texas.

Project Kilby is being framed as potentially one of the largest co-located power and data center developments in the United States, reflecting the growing practice of building dedicated generation assets near data center sites rather than relying solely on the grid.

Microsoft’s involvement underscores how AI infrastructure is tightening the relationship between cloud computing and energy supply, because training and running AI models generally require substantial, reliable electricity and power capacity.

While the report ties the deal to Microsoft’s data center needs, it does not provide additional specifics such as the planned site location details, the expected data center power draw, or how much of the output from Project Kilby would be reserved for Microsoft as opposed to other customers.

Chevron and Microsoft also did not disclose, in the material referenced by the report, the commercial structure beyond the headline duration and the stated connection to the natural gas plant. The public disclosure, at least in the cited post, does not spell out pricing terms, take-or-pay provisions, escalation clauses, or other contract mechanics that can materially affect economics.

In the broader energy and technology context, the push for dedicated power assets reflects a shift in how major cloud operators approach capacity constraints and grid reliability. For large data centers, energy availability can be as critical as server capacity, because even modest delays in power procurement can slow construction schedules and limit compute availability.

Next, investors and industry watchers are likely to focus on what Chevron and Microsoft ultimately confirm in formal filings or announcements, including final project timing, any permitting milestones for Project Kilby, and the degree of specificity around Microsoft’s portion of the capacity.