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(Reuters) – Chevron is exploring additional data center deals across the U.S., including the Midwest, Rockies, and Gulf Coast, following its two-decade-long contract to power a Microsoft data center in West Texas, a company executive told Reuters.
Oil and gas companies such as Chevron and Exxon Mobil are angling to profit from the record-high electricity demand generated by Big Tech’s AI-driven data center expansion, offering their natural gas and experience developing large and complex energy projects.
Chevron said on Monday it signed an agreement to develop a natural gas-fired power facility, called Project Kilby, which would have 2.67 gigawatts of capacity and provide dedicated electricity to Microsoft’s data center campus in Pecos, Texas. The project is the first of its kind for Chevron and will be big enough to power a city the size of San Francisco.
CHEVRON EYES TEXAS, MIDWEST, GULF COAST
The oil major sees potential for additional projects in West Texas, which is part of the Permian Basin, the top U.S. oilfield that holds abundant natural gas resources, said Jeff Gustavson, Chevron’s president of new energies, in an interview on Wednesday.
Other regions of interest include the Midwest and Gulf Coast — an important energy production and shipping area — as well as near Colorado’s Rocky Mountains, he said. The company is also considering data center deals in Utah, where Chevron has a hydrogen facility.
“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,” Gustavson said. “If we can put the right pieces together to meet our return thresholds, you can see more announcements over time.”
Kilby provides Chevron with a separate revenue stream not exposed to the commodity price risk of its core business. Gustavson said Chevron and its partners are finalizing project design details and declined to disclose the estimated cost.
Analysts said this week it is too early to tell whether providing power to data centers will become a meaningful revenue stream for Chevron.
Chevron expects to make a final investment decision by the end of the year. The first power from Kilby is expected in 2028, with the project taking several years to hit full capacity.
The project, which will require seven GE Vernova turbines and multiple smaller turbines from Caterpillar, can eventually expand beyond its initial 2.67 gigawatt capacity.
Reporting by Laila Kearney in New York and Sheila Dang in Houston; Editing by Rod Nickel
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