Chevron has signed a 20-year agreement with Microsoft to provide power to the tech giant's planned data center in West Texas. 

According to a June 22 release, Chevron will develop a power facility capable of delivering 2.67 gigawatts of capacity, enough to power around 2 million American homes. The facility will be located on the same site as the planned data center in Texas' Reeves County area, and will not be connected to the larger electrical grid.

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Chevron said that the initiative — dubbed "Project Kilby" — is designed to meet the growing energy demands of artificial intelligence, while avoiding additional strain on the regional power grid by supplying electricity directly to Microsoft's data center. Chevron said the facility will be built using a phased approach, allowing additional generating capacity to be added as Microsoft's power needs grow.

"AI is reshaping the global economy, and abundant, affordable, reliable energy is essential to fueling that transformation," said Chevron president of new energies Jeff Gustavson.

Pending a final investment decision expected later this year, the first phase of the project is scheduled to begin supplying power in 2028. On a large scale, Microsoft expects to spend roughly $190 billion in total capital expenditures this year, primarily to expand the computing capacity it needs to support its AI and data center ambitions.