Texas politics could delay investment decision for huge Chevron data center

The final investment decision on one of the largest new data center projects in the US could be delayed by Texas state politics. Project Kilby, a joint venture between Chevron and Joulent, is set to use nearly 3 gigawatts of gas turbines to power a large Microsoft data center in West Texas. Preliminary work at the site has already begun, and construction contracts are being finalized.

However, the final decision, expected by the end of 2024, might be pushed back to 2027 due to a moratorium on new data center permits imposed by Governor Greg Abbott.

Daniel Droog, Chevron's vice president for power solutions, noted that the permitting and regulatory process has caused some delays or potential delays in the industry overall. Despite this, Kilby is on track to start operations by 2028. The project offers several advantages, including generating its own power, not raising electricity costs for other consumers, and being located in a rural area with minimal NIMBY concerns.

This allows the project to leverage its abundant natural gas resources and create a new anchor customer for Chevron's gas.

Joulent, the developer of Kilby, has appointed former executives from LNG exporter Cheniere to key leadership positions. The project's construction contracts are expected to be finalized within a few weeks, and Joulent's CFO, Michael Wortley, is confident that the necessary state permits will be obtained. Despite the potential delays, Project Kilby has a 20-year offtake deal with Microsoft, which is considered highly reliable for a power project.

While politics may pose a challenge for data center development, Project Kilby appears to be well-positioned to overcome the obstacles.