Chevron to fuel massive Microsoft data center in Texas with natural gas

Chevron (CVX) signed a 20-year agreement to supply natural gas to Microsoft's (MSFT) massive West Texas data center, known as Project Kilby, the oil major announced Monday. The deal marks a major commitment by Microsoft to fossil fuel infrastructure to meet surging power demands from its AI and cloud computing operations.

The partnership positions Chevron to benefit from the ongoing data center buildout across the United States, as hyperscalers like Microsoft scramble to secure reliable energy sources. The two-decade term signals long-term revenue visibility for Chevron's natural gas business, while Microsoft locks in power supply for one of its critical infrastructure projects in a region where grid capacity remains tight.

The announcement comes as tech giants increasingly turn to direct energy partnerships—including nuclear and natural gas—to power energy-intensive AI workloads. Microsoft's willingness to contract directly with a fossil fuel producer underscores the scale of its infrastructure needs and the limitations of relying solely on grid power or renewable sources in the near term.