Overview
Chevron is investigating additional opportunities to supply electricity to large-scale data centers around the United States, company executives said. The exploration comes after Chevron reached an agreement to develop a natural gas-fired power plant that will deliver dedicated electricity to a Microsoft data center campus in Pecos, Texas.
Project Kilby and its role
The recently announced Project Kilby is planned as a 2.67 gigawatt natural gas-fired facility that Chevron said will provide dedicated power to Microsoft’s data center campus in Pecos. Chevron described the project as its first effort of this kind and said the facility would be capable of providing enough electricity to serve a city the size of San Francisco.
Where Chevron is looking next
Jeff Gustavson, president of new energies at Chevron, told Reuters the company sees potential for additional projects in West Texas - which is part of the Permian Basin and contains ample natural gas resources - and in other parts of the country. Regions of interest named by Gustavson included the Midwest, the Gulf Coast, and areas near Colorado’s Rocky Mountains. He also said Chevron is considering data center arrangements in Utah, where the company operates a hydrogen facility.
Commercial approach and partners
Gustavson said Chevron will pursue these opportunities both with Microsoft and with other potential customers. "We’ll look at other parts of the country. We’ll look at it with Microsoft. We’ll look at it with other potential customers," he said. He added that the company would move forward where it can meet its return thresholds, indicating additional announcements could follow if projects meet Chevron’s financial criteria.
Financial and operational details
Chevron said Kilby offers the company a revenue stream that is not directly exposed to the commodity price risk of its core oil-and-gas business. Gustavson said Chevron and its partners are finalizing the project design and declined to disclose the estimated cost.
Chevron expects to make a final investment decision on Kilby by the end of the year. The company projects first power from the facility in 2028, while it noted the plant will take several years after initial production to reach full capacity.
The project will require seven GE Vernova turbines and multiple smaller turbines supplied by Caterpillar, Chevron said. The company also noted the plant could be expanded beyond its initial 2.67 gigawatt capacity.
Market reaction and investor context
Market data cited in the announcement showed Chevron shares near the time of reporting with a quoted movement of CVX -1.06% and Microsoft shares showing MSFT +4.77%. Analysts have commented that it is too early to determine whether providing electricity to data centers will become a meaningful, long-term revenue source for Chevron.
Key points
- Chevron has committed to develop Project Kilby, a 2.67 gigawatt natural gas-fired power plant to supply Microsoft’s Pecos, Texas data center campus.
- The company is exploring additional data center power projects across the U.S., including West Texas, the Midwest, the Gulf Coast, areas near the Rocky Mountains, and Utah.
- Kilby represents a distinct revenue stream for Chevron that is not directly tied to oil and gas commodity price movements, though analysts say it is premature to judge the long-term financial significance.
Risks and uncertainties
- Project economics - Chevron has stated it will proceed only where projects meet internal return thresholds; estimated costs for Kilby were not disclosed, creating near-term uncertainty about project returns.
- Timing and scale - Chevron expects first power in 2028 and several years to reach full capacity, so revenue realization will be gradual and subject to construction and commissioning timelines.
- Revenue materiality - Analysts quoted in the reporting said it is too early to tell whether data center power contracts will evolve into a meaningful revenue stream for Chevron, introducing uncertainty for investors and energy-market participants.