ExxonMobil´s $5-billion Denbury purchase to speed up carbon capture and build ammonia business; company explores leveraging its upstream knowledge to enter lithium business
ExxonMobil will complete the Baytown chemical plant expansion, announced four years ago at a $2-billion projected cost, before the end of 2023 while the $5-billion purchase announced on July 13 of carbon capture and storage provider Denbury, that includes the largest CO2 pipeline network in the U.S., will help expand the low-carbon value chain businesses that include products like ammonia.
“The Baytown expansion after product qualifications should begin contributing by the fourth quarter,” said on July 28 Darren Woods, who has been the company´s chief executive officer since 2017.
“The Baytown expansion is the final product solutions component of the Growing the Gulf initiative announced in 2017. If you recall, the initiative committed to investments of $20 billion over 10 years to capitalize on the U.S.' advantaged resources (…),” he said in late July, during the company second quarter earnings discussion, according to a transcript of the call by Motley Fool.
The company is considering its experience in the upstream business as it eyes possibilities with lithium.
The Denbury´s $5-billion purchase
Denbury “will provide ExxonMobil with the largest owned and operated network of CO2 pipelines in the U.S.,” he said.
The purchase of the Plano, Texas-based company will “allow ExxonMobil to play an even greater role in a thoughtful energy transition,” Woods added.
“Of Denbury's 1,300 miles of CO2 pipeline, roughly 70% are in the Gulf Coast states of Louisiana, Texas, and Mississippi, one of the largest U.S. markets for CO2 reduction and home to some of ExxonMobil's largest integrated refining and chemical sites. And nine of the 10 strategically located CO2 storage sites are also in this region,” he added.
“A cost-efficient transportation and storage system accelerates CCS deployment for both ExxonMobil and our third-party customers,” Woods said.
ExxonMobil, and many other of the biggest petrochemical companies including BASF and Dow, have expressed interest in carbon storage in the Gulf Coast area.
The purchace of Denbury will also support “multiple low-carbon value chains, including CCS, hydrogen, ammonia, and biofuels. Ultimately, we see an opportunity to create a CCS business with the capacity to reduce emissions across the Gulf Coast by up to 100 million tons per year,” Woods added. Ammonia is a key resource for fertilizers.
New polymers unit
ExxonMobil had announced a $2-billion project on May 2, 2019 to expand its Baytown, Texas chemical plant, expected to create 2,000 jobs during constructions and with start-up envisioned by 2022. Woods said at the time that the expansion would help maximize the value of increased Permian Basin production
“Global demand for chemicals is expected to be greater than energy demand growth and GDP growth over the next 20 years,” Woods had said back in 2019. The plant included a new Vistamaxx polymers unit with 400,000 tonnes per year capacity.
The project was also at the time expected to enable ExxonMobil to enter the linear alpha olefins market, used in applications ranging from high-performing engine and industrial oils, waxes and building blocks for surfactants, polyethylene plastic for packaging, and other specialty chemicals.
The new unit after the expansion was set up to produce about 350,000 tons of linear alpha olefins a year, according to information released in 2019.
Baytown is among the world´s oldest and biggest chemical complexes. Since 1919 the Baytown facility stands on 3,400 acres along the Houston Ship Channel, 25 miles east of Houston. The facility includes a refinery, chemical plant, olefins plant, plastics plant and technology center.
Lithium production in the future?
“We're looking at, frankly, all the areas that we believe we have an expertise and a unique capability and seeing if there's a fit for products or solutions that can help society decarbonize. Lithium and production of lithium from brine water (...) is really an extension of a lot of the current capabilities that we have in our upstream,” Woods said.
Lithium production “requires a good understanding of the sub-surface, requires a good understanding of reservoir management, requires drilling and injections. And so I think the below-surface things are very much in line with the skills and capabilities that we've built out over the decades in our upstream business,” he added.
“The processing of the brine and extracting the lithium is very consistent with a lot of the things that we do in our refineries and chemical plants, and in fact, in some of our upstream operations. So that piece of the equation is, again, not new to the company,” he added, according to the transcript published by Motley Fool.
“And frankly, we've been looking at that for quite some time. I'd say we're still early in evaluating the opportunity, but we believe that by, again, applying our advantages in this space that we can bring on a much-needed resource,” he said.
Mexico-based Orbia, another petrochemical company, has made investments related to lithium production.
“Lithium, one that's predicted to go short, we can bring it on at a much lower cost and I think importantly with much less environmental impact versus, say, the open mining that they're doing in other parts of the world,” Woods said.
“So this, to us, feels like a potential win-win-win opportunity, a win using our capabilities, a win from an environmental impact standpoint, and a win in terms of supplying markets with a crucial component to electrification and EV,” Woods said.
Divesting non-strategic assets
While the company added to its chemical investments, it has divested from a 63,000 bpd refinery in Montana. Par Pacific Holdings took over Billings refinery, according to an early June report.
“In the second quarter, we completed the divestment of the Billings refinery. Including this sale, cash proceeds from divestments of nonstrategic assets have totaled roughly $2 billion year to date,” Woods said.
By Renzo Pipoli