Chevron Corp. signed a 20-year deal with Microsoft Corp. to provide natural-gas fired power for a proposed West Texas data centre, which could be one of the biggest in the United States. The plant, named Project Kilby, is expected to start producing power by 2028 and will ramp up to 2.67 gigawatts over time, enough to power more than 530,000 Texas homes, Chevron said in a statement Monday.
Project details and collaboration
Chevron is collaborating on the development with investment fund Engine No. 1 and plans to make a final investment decision later this year. The project will generate its own power, meaning it will not draw from the grid or involve a local utility, Jeff Gustavson, Chevron’s president of New Energies, said in an interview. “Consumers are concerned about and are already feeling the effect of power-demand growth,” he said. “We specifically designed this, in this part of the country, to avoid any of that.”
Chevron’s plant will feed cheap gas from the Permian Basin, America’s biggest oil field, to several large GE Vernova Inc. turbines that will power a data-centre campus that Microsoft plans to build on that site near the city of Pecos, Texas. The Permian Basin produces natural gas as a byproduct of oil extraction, often in excess of pipeline capacity, resulting in low local prices. “This is the most abundant gas basin in the country, maybe the world,” Gustavson said. The power plant “brings demand to the basin to use that gas and not waste it.”
Context and industry trends
Microsoft is aggressively building data centres as it competes with Alphabet Inc. and Amazon.com Inc. to expand in artificial intelligence. The longtime backer of OpenAI plans to double its data-centre footprint over the next two years. The partnership with Chevron is expected to supply the large quantities of reliable power needed for AI’s energy-hungry models. Overall, the U.S. is expected to double its data centre capacity to 77 gigawatts by 2030, according to BloombergNEF, putting severe pressure on the power grid and raising costs for consumers.
Microsoft has a target to match 100% of its hourly electricity use with renewable energy purchases by 2030 but is now considering delaying or abandoning that goal, Bloomberg reported in May. The company is racing to secure enough energy to meet the demands of AI.
Texas data centre landscape
Texas has 33 gigawatts of planned data-centre power projects, the largest in the country ahead of Virginia, according to BNEF. However, most are early-stage proposals, and Virginia has more in construction. Chevron and Engine No. 1 have committed orders for seven GE Vernova natural gas turbines, which typically have a years-long backlog. Engine No. 1 has the option of buying a 50% stake in the project and funding the same proportion of capital spending. Chevron has not revealed the total cost, but people familiar with the project pegged it at about US$7 billion in April.
“In our peer group a lot of others are talking about doing things like this. We’re now actually doing it. We think that differentiates us,” Gustavson said.
