Chevron, through its wholly owned subsidiary Energy Forge One, has entered into a 20-year agreement to provide dedicated electricity to a Microsoft-operated data centre in West Texas, US.

The arrangement will see Energy Forge One develop a co-located power facility to support Microsoft’s growing operations in the region.

The initiative, known as Project Kilby, is set to deliver approximately 2.67GW of capacity. The project will be built using a phased, modular approach that allows for gradual expansion.

Most of the power generation will come from large GE Vernova turbines and related infrastructure, with additional capacity supplied by Solar Turbines, a Caterpillar subsidiary.

Chevron is collaborating with Engine No. 1 on the project.

According to the companies, the facility is designed to deliver reliable, dispatchable electricity specifically to Microsoft to reducine impact on the broader regional grid.

Chevron New Energies president Jeff Gustavson said: “Chevron is uniquely positioned to deliver power to customers with certainty, speed and at a competitive cost, leveraging Permian natural gas and our proven execution capabilities.

“This project links Chevron’s traditional strengths to emerging demand, creating differentiated value for our shareholders and the communities where we operate.”

The project aims to reach a final investment decision by the end of 2026, subject to additional requirements being met. Chevron anticipates beginning power supply in 2028.

The company indicates the project is targeting “mid-teen” returns and expects the cash flow generated to be diversified from oil and gas price trends.

Project Kilby is projected to contribute more than $10bn in state and local tax revenue, support almost 2,000 jobs and provide additional economic advantages for the West Texas region.

The facility will use non-potable, brackish groundwater for operations and incorporate technologies intended to reduce air emissions, as well as measures to limit noise and light effects on surrounding communities.

MN8 Energy recently commenced commercial operations at two utility-scale solar projects in the US with a combined capacity of 260MW-alternating current, providing electricity to Microsoft under long-term supply agreements.