Saudi-owned, Houston-based Motiva Enterprises over the weekend inked two agreements that represent billions in potential investments to take advantage of growing U.S. natural gas and oil feedstocks.
Memorandums of understanding (MOU) were signed with TechnipFMC and Honeywell UOP to study at least two petrochemical (petchem) projects. The signing ceremony in Houston coincided with the official visit to the United States by Saudi Crown Prince Mohammed bin Salman.
The potential projects are worth an estimated $8-10 billion.
“These agreements signal our plans for expansion into petrochemicals,” said Motiva CEO Brian Coffman. “We are excited to work more closely with these leaders in the industry to further assess our opportunities for investment.”
Motiva, owned by affiliates of state-owned Saudi Arabian Oil Co., aka Aramco, refines, distributes and markets petroleum products throughout the United States. The company operates North America’s largest refinery in Port Arthur near Houston, with crude capacity of 630,000 b/d, and it operates the largest U.S. lubricant plant.
One of the MOUs “paves the way to evaluate the use of TechnipFMC’s world scale mixed-feed ethylene production technologies in the U.S.,” Motiva management said. “The second MOU enables Motiva to examine the use of Honeywell UOP’s world scale aromatics extraction and production technologies for benzene and paraxylene for development of a potential complex along the U.S. Gulf Coast.”
The MOUs are a first step in Motiva’s potential expansion into petchems. Final investment decisions (FID) are not expected to be made until 2019 “and are dependent on strong economics, competitive incentives and regulatory support,” the company said.
Last month, Aramco clinched commercial oil and gas partnerships with several U.S. energy companies and other global operators that combined are worth $10 billion-plus.
At the Saudi-US CEOs forum in New York City, Aramco secured agreements with ARO Drilling, Baker Hughes, a GE Company, Halliburton Co., Honeywell International Inc., Saudi Aramco Nabors Drilling, Schlumberger Ltd., Texas Iron Works and Weatherford International Ltd. Other partnerships were inked with Google, National Geographic and the Smithsonian Institute.
In December, Aramco had signaled that it was interested in making investments outside the kingdom, and reportedly had inquired about purchasing unconventional assets in the Permian Basin and the Eagle Ford Shale.
Aramco also reportedly has discussed with Houston’s Tellurian Inc. about acquiring a stake or purchasing natural gas from a flurry of projects underway in Louisiana and Texas.
The Saudi dealmaking coincides with potential plans to spin off Aramco eventually as a public company, which could be valued at up to $2 trillion, making it the world's largest.
Motiva “has been looking to grow and has signaled for the past year that petchems would be an attractive investment,” noted analysts with Tudor, Pickering, Holt & Co. Inc. (TPH). “It is a little surprising the cracker would be mixed feed, given nearly all of the new Gulf Coast crackers under construction are ethane-only, but mixed feed does provide for more flexibility (albeit at a higher cost).”
Excluding the potential Motiva mixed feed project, TPH estimates that U.S. ethylene capacity could increase to 95 billion pounds/year in 2022 from current capacity of around 67 billion pounds/year, which would represent a 7.4% five-year compound annual growth rate.
If it were to expand the Port Arthur refinery to 1-1.5 million b/d, it would be the world’s largest, the TPH team noted. “Such a project would raise U.S. refining capacity by 2-5%, quite a significant increase considering over the past five years, total U.S. refining capacity has only grown 1.4% annually.”
Meanwhile, ExxonMobil Corp. and state-owned Saudi Basic Industries Corp., or SABIC, agreed last year to jointly develop a world-class ethane steam cracker on the South Texas coast near Corpus Christi.
If the companies move forward, the facility would be able to produce 1.8 million metric tons/year (mmty) of ethylene. The proposed cracker would feed a monoethylene glycol unit and two polyethylene units, which as planned would be the largest in the world.
With the site selection completed, the partners were applying for the necessary air and wastewater permits from the Texas Commission on Environmental Quality. Each company would make an FID about the facility once the required permits have been granted.