Exxon's $20bn Gulf Coast downstream plan signals sustained export demand

ExxonMobil is targeting key export markets such as Asia though 11 Gulf Coast chemical manufacturing and export facilities, including back-to-back ethane cracker projects which will add to the region's surging ethylene supply.

ExxonMobil's expansion program includes the above proposed 1.8 million mt/year ethylene cracker facility near Corpus Christi.

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ExxonMobil plans to spend $20 billion in 2013-2022 on Gulf Coast refining, petrochemicals and LNG export projects, Darren Woods, ExxonMobil's newly-appointed CEO, announced March 6.

ExxonMobil's 'Growing the Gulf' expansion program groups together 11 previously-announced projects at proposed new and existing facilities along the Texas and Louisiana coasts.

The projects will expand ExxonMobil’s chemical manufacturing and export capacity, taking advantage of low-cost shale production to forge downstream advantages. Most of ExxonMobil’s planned new Gulf coast chemicals expansions are targeting export markets in Asia and other regions.

“These projects are export machines, generating products that high-growth nations need to support larger populations with higher standards of living,” Woods told a conference in Houston.

“Those overseas markets are the motivation behind our investments. The supply is here; the demand is there. We want to keep connecting those dots,” he said.

                   Exxon’s Growing the Gulf expansion program

                                                    (Click image to enlarge)

Data source: Perryman Group report: 'Economic and fiscal benefits of ExxonMobil’s current and proposed Gulf Coast operations and investments', media reports.
1. Some expenditure values from the Perryman Study reflect dollars changing hands as a result of the economic stimulus, and may slightly overstate the project cost.

Construction surge

Wood's announcement underlined ExxonMobil's participation in back-to-back waves of ethylene facility construction taking place on the Gulf Coast.

There are currently eight Gulf Coast ethane crackers under construction. Six of these are slated to come on stream by the end of 2017, representing more than 7 million tons per annum of new ethylene capacity.

In a second wave of projects, ten more ethylene facilities have been proposed for the Gulf Coast and the U.S. Northeast, eight of which are in development.

ExxonMobil is currently building a 1.5 million mt/year ethane cracker at its Baytown, Texas, complex, which is expected to start up in mid-2017.

The company is also planning to build a giant 1.8 million mt/year ethylene cracker on a new site in Portland next to Corpus Christi, Texas, in a 50-50 joint venture with Saudi Arabia Basic Industries Corporation (Sabic). The joint 'Gulf Coast Growth Ventures' (GCGV) project will include associated monoethylene glycol unit and two polyethylene units on the site.

                                            US ethane cracker projects

Source: Petrochemical Update's US Ethylene Plant Construction Costs report, Q4 2016

The Corpus Christi area has good access to natural gas and natural gas liquids from the Permian Basin, where ExxonMobil holds oil and gas production reserves. The area has access to rail networks to transport products, either to domestic hubs or to the Houston ship Channel for export.

Other operators are building plants in the Corpus Christi area. On February 27, the OxyChem/Mexichem consortium completed a 544,000 mt/yr ethane cracker in nearby Ingleside. The facility will produce 1.2 billion pounds (550,000 metric tons) of ethylene per year to feed the manufacturing of vinyl chloride monomer (VCM), for the production of produce polyvinyl chloride (PVC resin) and PVC piping systems.

   ExxonMobil and Sabic's Gulf Coast Growth Ventures project

Data source: Gulf Coast Growth Ventures (GCGV)

ExxonMobil and Sabic are yet to select final site and make a final investment decision for the GCGV project. The project is expected to take around five years to build and the estimated cost of the project has been reported at around $10 billion, although many of the current Gulf Coast ethane cracker projects have seen costs rise during the construction period.

"It is premature to speculate on final costs until detailed design is completed and the value of construction contracts is available," Aaron Stryk, ExxonMobil spokesman, told Petrochemical Update.

The developers say the project could create 11,000 direct jobs during the five-year construction phase and 600 permanent on-site jobs, but some local residents have opposed the plan.

Tax abatements have formed a key part of discussions with local residents and a siting decision will not be made until tax abatement applications to San Patricio County and Gregory-Portland Independent School District have advanced, Stryk said.

"Once the study phase is complete, the project will be in a position to select a site," he said.

Investments soon

As ExxonMobil and Sabic tackle siting challenges for the GCGV project, final investment decisions on several other Gulf Coast projects are expected this year.

The first and second waves of Gulf Coast projects include a significant amount of international investment. While President Trump's criticism of certain international trade deals has raised some concerns, his pledges to support the oil and gas industry have buoyed confidence in the petrochemicals sector.

Taiwan's Formosa is planning to build a 1.2 million mt/yr cracker in Louisiana, in addition to a new 1.6 million mt/yr cracker facility in Texas due to come online this year.

Formosa is awaiting a Louisiana State permit for the proposed Louisiana facility and the company expects to benefit from less stringent government regulations under the Trump administration, company chairman Chen Bao-lang told Reuters in an interview March 1.

Formosa is now hoping to start production of the Louisiana ethane facility in 2021, a year ahead of schedule, he said.

"We are more optimistic about the investment," Che said.

"At least the obstacles will be fewer...we're aiming to get an air permit in August 2018," he said.

By Kevin Boyle