Exxon Mobil is exporting the petrochemical boom
Most of the world’s petrochemical demand growth is expected to come from Asia, especially in China.
Exxon Mobil Corp. is riding the petrochemical boom along the Texas Gulf Coast with massive multibillion-dollar chemicals and plastics expansions in the Houston, Beaumont and Corpus Christi regions.
All this growth is driven by the shale boom and the surplus of cheap natural gas liquids that serve as petrochemical feedstock, giving U.S. chemical makers a cost advantage over their international rivals.
So what’s next up for Exxon Mobil? China.
Exxon Mobil said recently that it’s planning to build a multibillion-dollar chemicals and plastics complex in the south of China in Guangdong province.
While building in the U.S. still has advantages, most of the world’s petrochemical demand growth is expected to come from Asia, especially in China, where the emerging middle class is demanding more consumer products, invevitably made from or packaged in plastic. So why not build there and cut out most of the transportation costs?
The project, which also would include a liquefied natural gas import terminal, is slated for completion in 2023. That means that Texas shale gas could still be used to manufacture the plastics, albeit in China.
A second-wave petrochemical boom is taking root along the U.S. Gulf Coast, but other major expansions are ongoing in the Middle East and Asia, according to a new report from the analytics firm GlobalData. China and the U.S. are almost even with about $52 billion each in planned petrochemical investments from 2017 to 2026, GlobalData estimates. Chinese companies are leading much of that growth.
Exxon Mobil is now joining the fray. While it already has a massive Asian petrochemical presence in Singapore, the company has only a small foothold — for now — in China with investments in some projects and a recently completed expansion of Exxon’s research center in Shanghai.
Meanwhile, mired in protests and lawsuits, Houston pipeline giant Kinder Morgan sold its Canadian Trans Mountain oil pipeline expansion just in time.
In the end of May, the Canadian government agreed to purchase the pipeline for nearly $3.5 billion after Kinder Morgan threatened to scrap the project over federal and provincial bickering. But just days prior to the sale becoming final last week, an appeals court ordered the project to stop and for the Canadian government to redo its initial environmental review.
Needless to say, the legal wrangling will continue, but Kinder Morgan can walk away with billions of dollars and focus on its pipeline projects in Texas.
Canada, meanwhile, is investing in Texas pipelines as well. The Canadian pension fund called OMERS recently agreed to pay $1.4 billion to buy a 50 percent stake in the BridgeTex oil pipeline that runs hundreds of miles from West Texas’ Permian Basin to Houston. Houston’s Plains All American Pipeline and Oklahoma’s Magellan Midstream will combine to own the remaining 50 percent.
That’s a lot of pipeline activity, eh?
Sorry for that.