On June 22, Chevron’s Energy Forge One subsidiary signed a 20-year power purchase agreement with Microsoft to develop Project Kilby, a 2.67 GW co-located natural gas power plant in Reeves County, Texas, that will feed a Microsoft data center campus on a 7,000-acre site near Pecos, Texas. The plant will sit behind the meter, meaning the electrons flow directly to the data center and never touch the ERCOT grid. First power is anticipated in 2028 and Chevron’s Final Investment Decision is expected by year-end 2026, with the project targeting mid-teen returns.

What’s happening

• Project Kilby will deliver approximately 2.67 GW of dispatchable natural gas generation through a phased, modular build [Chevron, June 22, 2026].
• A majority of the generation will come from GE Vernova heavy-duty gas turbines, with additional capacity supplied by Caterpillar’s Solar Turbines unit [Chevron, June 22, 2026].
• Engine No. 1, the activist fund that won three board seats at ExxonMobil in May 2021 on a climate-transition platform, is Chevron’s co-development partner on Kilby [CNBC, June 2021; Energy Capital HTX, April 2026].
• The total project is reported at roughly US$7 billion, with first power in 2028 and Microsoft’s adjacent 2,500 MW data center campus drawing directly from the site [Energy Capital HTX, June 22, 2026; Quartz, June 22, 2026].
• Reeves County is projected to receive more than US$10 billion in state and local tax revenue and almost 2,000 jobs over the contract life. Brackish, non-potable groundwater is planned for plant operations, with Selective Catalytic Reduction on the stacks for NOx control [Chevron, June 22, 2026].

Why off-grid

The deal answers the question every hyperscaler has been asking since 2024: how do you put two-plus gigawatts on the ground in three years when grid interconnection queues stretch into the 2030s? The Kilby answer is to skip the grid entirely. Energy Forge One builds the gas plant. Microsoft’s campus consumes the electrons. ERCOT is not in the loop.

The turbines are the choke point. GE Vernova’s gas turbine backlog hit 100 GW in Q1 2026, up from 80 GW at year-end 2025, with management guiding to at least 110 GW by year-end 2026 [Utility Dive, April 2026]. The company shipped 25 heavy-duty units in Q1, a 32 percent year-over-year increase, and is targeting 20 GW of annualized turbine production by mid-2026 and 24 GW by mid-2028 [Utility Dive, April 2026]. Kilby books slots inside that already crowded book. Solar Turbines fills the smaller-scale gap with industrial machines that ship faster.

Brazil angle

Brazil has the gas. Petrobras brought its eighth Búzios platform, P-79, online ahead of schedule on May 1, 2026 in the Santos Basin pre-salt, with 180,000 barrels per day of oil capacity and 7.2 million cubic meters per day of gas compression. Connection to the Rota 3 pipeline allows for up to 3 million cubic meters per day of additional gas supply to the Brazilian mainland [Petrobras 6-K, May 1, 2026; Agência Brasil, May 2026]. Pre-salt accounted for 82 percent of Petrobras’s total production in 2025 [Petrobras 2025 results, Globe and Mail, January 2026].

The data center buildout looks nothing like Kilby. Brazil’s flagship hyperscale project, the Scala AI City in Eldorado do Sul, Rio Grande do Sul, secured authorization from the Ministry of Mines and Energy in May 2025 for a 5 GW ramp-up connection to the National Interconnected System (SIN). The campus is grid-tied with long-term PPAs to wind and hydro generators extending into 2039 [Data Centre Magazine, May 2025]. Brazil’s full data center market is projected to grow from US$3.98 billion in 2025 to US$9.01 billion by 2034 [IMARC, 2026]. None of that capacity, to our knowledge, is being designed behind the meter on stranded pre-salt gas. The processing infrastructure on land is missing, ANEEL has no settled regulatory framework for hyperscale co-located generation, and there is no domestic gas-turbine OEM to clear the GE Vernova queue. Petrobras keeps reinjecting.

US angle

Chevron is now a power developer. Kilby converts upstream Permian gas into long-duration utility-scale cash flow that is independent of oil and gas price cycles. Engine No. 1, the same fund that won the 2021 ExxonMobil board fight on a climate platform, is writing equity into 2.67 GW of new natural gas generation because that is where the compute is going. Add oil-major-as-power-developer to the list of new utility entrants alongside Constellation, Talen, Vistra, and the SMR cohort. The model is replicable. If Kilby clears FID at year-end 2026 with the targeted mid-teen returns, competing oil majors are likely to announce their own co-located projects in 2027.

China angle

China is solving the same problem differently. The Eastern Data Western Computing initiative, launched in February 2022, builds data centers in Inner Mongolia, Ningxia, Guizhou, and other western provinces where renewable power and land are cheap, then routes the workloads east on dedicated fiber [ICDS, 2026]. The model relies on the state grid and on coal plus hydro plus wind at the supply end, not behind-the-meter gas. Shenzhen brought up the country’s first 10,000-card intelligent computing cluster in March 2026 using Huawei silicon [DCD, March 2026]. China’s data center market is forecast at US$87.27 billion by 2034, with Chinese government estimates of current utilization at 20 to 30 percent across the western EDWC sites [IMARC, 2026; DCD, 2026]. Behind-the-meter co-location is not the playbook. State coordination is.

What it means

Kilby is the highest-profile validation yet of behind-the-meter gas as the hyperscaler power model in the US. Three implications. First, the GE Vernova backlog should tighten further as oil majors and competing hyperscalers chase the Kilby template, and the small-frame industrial turbine market (Solar Turbines, Siemens Energy SGT-series, Mitsubishi H-25) becomes a backup channel for incremental gigawatts. Second, ERCOT interconnection economics shift: behind-the-meter projects do not add congestion premia to retail rates and do not require ERCOT capacity build-out, so the political fight over data-center load on the grid becomes asymmetric depending on whether projects are grid-tied or co-located. Third, the SOV50 read changes at the margin: more of the US AI buildout is now exposed to domestic gas supply, turbine-OEM concentration, and high-voltage switchgear and copper for behind-the-meter substations, rather than to ERCOT transmission and to nuclear restart politics.

What to watch

• Chevron Final Investment Decision on Kilby, targeted year-end 2026. Any slip past Q1 2027 takes momentum out of the off-grid hyperscaler model.
• A second oil-major co-location announcement (ExxonMobil, ConocoPhillips, or Occidental) within twelve months of Kilby FID.
• ANEEL public consultation on behind-the-meter rules in Brazil, and any signal from MME that pre-salt associated gas could be diverted from reinjection to onshore compute. If Brazil legalizes off-grid hyperscaler campuses, the pre-salt gas balance becomes a strategic asset for Latin American AI infrastructure.