Investing.com -- Chevron has struck a 20-year agreement to supply natural gas power to a massive Microsoft data center in West Texas, the latest sign of Big Oil’s push into the booming AI energy market.

Shares in the oil major rose 1.3% in premarket trading by 08:27 ET (12:27 GMT).

The project, called Project Kilby, is set to consume nearly 2.7 gigawatts of electricity — enough to power roughly 2 million homes — and would span more than 2,000 acres in Reeves County, deep in the Permian Basin.

Chevron is partnering with Joulent, an energy company backed by activist investment firm Engine No. 1, to build a power-generation complex fueled by natural gas from Chevron’s existing fields in the region.

Most of the electricity will come from large gas turbines supplied by GE Vernova, with Caterpillar also providing turbines, Chevron said. The power infrastructure will be built directly at the data center site.

Chevron said it expects to make a final investment decision on the gas-fired plant after obtaining necessary permits later this year, with initial power delivery targeted for late 2028 and a full build-out continuing into the 2030s.

No cost estimate was disclosed for the project.

“AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation,” said Jeff Gustavson, president of Chevron’s New Energies unit.

"Our agreement with Microsoft through Project Kilby represents Chevron’s unique ability to deliver power to AI customers with certainty, speed and at a competitive cost, leveraging Permian natural gas supply, infrastructure and our proven execution capabilities," he added.

Project Kilby marks the first major AI data center collaboration between Chevron and Joulent, and reflects a broader trend of energy companies moving to capture surging electricity demand as tech giants turn to natural gas fields to power their AI ambitions.