ExxonMobil Corp. and its Saudi Arabian partner have pulled the trigger to sanction the world’s largest steam cracker, a 1.8 million metric ton/year project on the South Texas coast likely to create thousands of high-paying jobs and billions in economic output.
The decision to build Gulf Coast Growth Ventures near Corpus Christi in San Patricio County came last Thursday, one day after the Texas Commission on Environmental Quality granted a series of permits for the project.
The joint venture (JV) between affiliates of ExxonMobil and Saudi Basic Industries Corp., i.e. SABIC, would rely on abundant Lower 48 natural gas, particularly from the Permian Basin and Eagle Ford Shale, to fuel the facility.
“Building the world’s largest steam cracker, with state-of-the-art technology, on the doorstep of rapidly growing Permian production gives this project significant scale and feedstock advantages,” said ExxonMobil CEO Darren W. Woods. “It is one of several key projects that provide the foundation for significantly increasing the company’s earnings potential.”
Construction is scheduled to begin in the third quarter with startup anticipated by 2022. Included in the design are two polyethylene units and a monoethylene glycol unit.
SABIC CEO Yousef Al-Benyan noted that the JV would be its first “outside of Saudi Arabia. This project will not only increase global diversification for our company, but will also continue to create value within our new home of San Patricio County through creating jobs and supporting economic growth.
“With this project, we look forward to further building our business presence in the U.S. and serving the communities and customers in the North and South American markets even more effectively.”
SABIC is the operating partner for two long-standing JVs with ExxonMobil in the Kingdom of Saudi Arabia, Kemya in Jubail and Yanpet in Yanbu.
The South Texas facility is expected to create more than 600 permanent jobs with average annual salaries of $90,000/year, according to ExxonMobil. An additional 6,000 jobs would be created during construction.
“A preliminary independent study, conducted by Impact DataSource, estimates the project will generate more than $22 billion in economic output during construction and $50 billion in economic benefits during the first six years of operation,” according to the partners.
The project would be designed to produce materials used in the manufacturing of various consumer products including automotive coolants, packaging, agricultural film and building, construction materials and clothing.
Project construction is to be led by four primary engineering, procurement and construction companies: The Wood Group, McDermott & Turner Industries Group, Chiyoda & Kiewit and Mitsubishi Heavy Industries & Zachry Group.
ExxonMobil has been bearing down on expanding its Gulf Coast presence under its $20 billion Growing the Gulf initiative, which in total could create more than 45,000 jobs across the region. The supermajor has projects in the works that include a state-of-the-art aviation lubricants blending, packaging and distribution facility in the Baton Rouge, LA, area, as well as refining and chemical expansions at the Beaumont and Baytown facilities east of Houston.
In addition, ExxonMobil and Qatar Petroleum in early February sanctioned the Golden Pass liquefied natural gas export project in Sabine Pass, TX, which is estimated to cost around $10 billion.
Gulf Coast Growth Ventures “is a unique opportunity created by the abundance of low cost U.S. natural gas,” ExxonMobil noted. “The project is part of SABIC’s growth strategy to build new petrochemical facilities in key markets, including the Americas, to address industry demand and achieve the company’s 2025 strategy.”
Saudi Arabian Oil Co., aka Aramco, the national oil company, in March agreed to buy a 70% stake in SABIC in a $69.1 billion deal that was made to pave the way for an infusion of investments into global oil and gas deals beyond the Middle East.
The deal merged the kingdom’s two largest companies and has provided Aramco with about the same amount of money it had been expected to recoup in an initial public offering (IPO). Once expected to be the largest on record, the IPO was shelved last year.
The Corpus cracker project is 50-50 owned by each partner, with ExxonMobil as site operator.
Keeping on track to improve efficiencies and lower costs, the petrochemical project likely to come in 25% below industry expectations for scale, design efficiency and execution strategy, according to Tudor, Pickering, Holt & Co. Inc. (TPH).
Analysts in a note Friday reminded investors that during ExxonMobil’s annual investor day in March, executives estimated incremental earnings for the ethane project at around $500 million/year, based on 2017 margins.
“Time will tell how margins shake out in a 2022 timeframe, but the company has remained conservative on the near-term,” TPH said.
ExxonMobil executives in March outlined strategy for 13 chemicals facilities, including the Corpus project, with seven already online. The investments overall are expected to deliver 30% sales growth by 2025, mostly driven by technology enabled performance products.
The South Texas area already has seen a major influx of oil and gas infrastructure investment keyed to export growth.
Boosted by Lower 48 production growth that needs export markets, the Port of Corpus Christi, which is about 200 miles south of the energy capital of Houston, is expected to emerge over the coming decade as the nation’s No. 1 crude export hub.
Wood Mackenzie in a recent report said major investments in shipping facilities and pipeline infrastructure will lead to boom times in South Texas. Analysts said onshore volumes could increase by 4 million b/d in the next five years, with a significant portion headed to the South Texas coast via Permian pipeline projects.
“More than 2 million b/d of pipeline capacity between the Permian Basin and Corpus Christi is currently under construction and is due to come online within the next eight to 12 months,” said researchers. At peak production, the Corpus Christi region “will account for 56% of total U.S. crude shipments abroad.”