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article imageExxon and Saudi company betting heavy on plastics with Texas deal

By Karen Graham     Jun 17, 2019 in Business
Exxon Mobil Corp. and Saudi Arabia’s state-controlled petrochemicals company formally approved construction of a new $10 billion petrochemical complex in Texas that will process production from the Permian Basin’s booming oil and natural gas wells.
Riyadh-headquartered petrochemicals giant Saudi Basic Industries Corporation (SABIC), 70 percent owned by the Saudi Arabian government, obtained the necessary approvals to set up the petrochemical joint venture - Gulf Coast Growth Ventures project -with US oil and gas giant Exxon Mobil near Corpus Christie, Texas in the Gulf Coast.
The approval for the project was announced on June 13, with the specific mention the project also included environmental permits. The chemical complex will process production from the Eagle Ford and the Permian Basin into chemicals that are then used in plastics production.
The facility was originally announced in 2016 by Exxon, while the joint venture to develop the 1.8 million ton ethane cracker plant with the Saudi-owned company was announced in May of 2018. The facility will also include a monoethylene glycol unit and two polyethylene units, according to Construction Week Online.
According to the Financial Post, in a joint statement on Thursday, last week, the two companies said the project will create $50 billion of “economic output” in its first six years. The project is expected to create 600 permanent jobs and roughly 3,500 indirect and induced jobs during operations, as well as 6,000 construction jobs during the peak of construction.
Leaving Corpus Christi  and filming the Citgo oil refinery on the way out of town  Jordan Salazar sa...
Leaving Corpus Christi, and filming the Citgo oil refinery on the way out of town, Jordan Salazar says Good-bye.
Jordan Salazar
The Texas petrochemical plants and pipelines is reporting that the petrochemical complex is already facing opposition from many communities that are now expected to request a hearing on the matter, which means the complex is not yet a done deal.
The Exxon-SABIC venture is just one of a number of chemical plants and refineries being built in the Gulf Coast as companies take advantage of the ultra-cheap production from the Permian, the world’s largest shale basin. There has also been a lot of wheeling and dealing on ventures to build new pipelines across Texas.
The Red Oak pipeline system project is a joint venture with Phillips 66 and Plains All American. Again, the production from the Permian Basin is at the heart of the pipeline project and will move crude oil to destinations across Texas. The cost is seen at $2.5 billion and the pipelines should be operational in the first quarter of 2021.
The US is overtaking Norway with the export of ethylene. Pictured is a petrochemical (polyethylene) ...
The US is overtaking Norway with the export of ethylene. Pictured is a petrochemical (polyethylene) plant in Norway.
Shale oil production rising
EIA’s latest Short-Term Energy Outlook sees U.S. oil production growth at 1.4 million bpd this year and 900,000 bpd in 2020. With shale oil production at an all-time high, U.S. petrochemical plants are churning out and exporting more ethylene than the world’s only other exporter of ethylene - Norway.
But there is a problem. Most of the oil in the oil patch is light, while the Gulf Coast refineries need a mix of light and heavy in order to operate. To convert the equipment to handle light oil only would cost tens of billions of dollars.
To export just the light oil is not really an option because the global demand is already well supplied. It is the heavy crude that is profitable. This means that U.S, production will continue to remain a price suppressor for the near future, based on supply and demand.
More about Exxon, Saudi Basic Industries Corp, petrochemicals, Plastics, ethane cracker
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