Chevron Picks Texas Pacific Land for $7B Microsoft Data Center Campus

Chevron Corporation (NYSE:CVX) selected Texas Pacific Land Corporation on June 23 to provide land and brackish groundwater for Project Kilby, a $7 billion data center campus the oil giant is building with Microsoft (NASDAQ:MSFT). The agreement covers about 10,000 acres in the Permian Basin and locks in one of the largest single-site water and land packages for an AI infrastructure project, according to the company.

Project Kilby is designed to run on natural gas with carbon capture, targeting 2.67 gigawatts of computing capacity. Chevron will supply gas from its West Texas pipeline network. Microsoft will anchor the power demand for cloud and AI workloads. The arrangement ties two of the most watched trends in energy markets this year: the build-out of AI data centers and the search for new outlets for Permian gas production that might otherwise compete with exports.

Texas Pacific Land already supplies water to Chevron's drilling operations in the basin. Extending that relationship to a data center project shows how oil-field logistics are feeding into the broader electrification story. The company will also make its surface land available for the facility. Texas Pacific Land shares rose 2.2% after the announcement. The company's valuation had already climbed on expectations that data center water deals would add a new revenue stream beyond its traditional mineral rights business. That expectation is now becoming cash flow.

Chevron's Alpha Score sits at 45 out of 100, a mixed reading that reflects the tension between its strong dividend history and the uncertainty around crude prices. Microsoft's Alpha Score is 42, also mixed. Both stocks were up on the day, with Microsoft gaining 5.71% to $372.97 and Chevron rising in sympathy.

For natural gas markets, the deal carries weight. Project Kilby alone will consume roughly 0.5 billion cubic feet of gas per day at full build-out, traders said. That is equivalent to about 0.5% of current U.S. gas consumption. Multiply that by dozens of similar projects in planning stages across Texas, Virginia and the Midwest, and the cumulative pull on supply starts to look material. The EQT data-center gas thesis rests on the same logic: AI-driven electricity load will force utilities to sign long-term gas contracts, pulling supply away from the export market and tightening balances.

The shift has already started. The forward curve for Henry Hub gas for 2026 delivery has firmed relative to prompt months, a pattern that reflects growing expectations of structural demand growth, not just winter weather risk. If even half of the announced data center projects get built, the U.S. gas market will need to add supply beyond current drilling plans, analysts at Enverus said.

Chevron is also positioning Project Kilby as a test case for carbon capture at scale. The company plans to inject CO2 from the plant's gas turbines into depleted Permian reservoirs for permanent storage. That would help Microsoft meet its net-zero pledges while allowing Chevron to keep selling gas in a tightening regulatory environment. The economics of capture at a gas plant remain unproven at this scale, the Department of Energy has awarded tax credits that make the math work at current carbon prices, according to project filings.

The next concrete milestone for Project Kilby is the final investment decision, expected in the fourth quarter of this year. Chevron has said it aims to begin construction in early 2026 and reach full power by 2029.