ExxonMobil Corporation
(
XOM
) is planning an extensive petrochemical expansion program at its
Baytown complex. This move mainly reflects the U.S. energy giant's
confidence to capitalize on the country's increasing supply of
natural gas in the filed of chemical industry.
This multibillion dollar expansion program at ExxonMobil's
petrochemical complex − located approximately 30 miles (50
kilometers) east of Houston − involves the construction of a new
ethane cracker at the Baytown complex as well as two polyethylene
production lines in the neighborhood of its plastics plant in Mont
Belvieu.
The company has already filed approval requests with the U.S.
Environmental Protection Agency and the Texas Commission on
Environmental Quality. However, the final decision of the project
will be taken following the completion of the review and approval
procedure that is expected to take about a year or so. ExxonMobil
also expects the facilities to be online in 2016.
Operating since 1920, ExxonMobil's Baytown is the largest
petroleum and petrochemical complex in the U.S. Its steam cracker
is able to tackle up to 1.5 million tons per year and provide
650,000 tons of feedstock to the new production lines at the Mont
Belvieu plastics unit.
Apart from generating 10,000 temporary construction jobs as well
as 350 permanent jobs, this expansion will likely create
approximately 3,700 jobs in the Baytown area. ExxonMobil occupies
the pioneering position in North America's natural gas producer
following the acquisition of XTO Energy for $25 billion
in 2010. Hence, utilization of much low priced gas for a
petrochemical feedstock is believed to be the most profitable
option that also generates more employments at home.
The company remains enthusiastic about the abundance of North
American natural gas resources and believes that it can sustain
domestic energy needs as well as export to the international
market. ExxonMobil's Gulf Coast agenda and Baytown, are well
equipped to meet domestic requirements. It can also
cost-effectively export chemical production to South America,
Europe and Asia Pacific.
Hydraulic fracturing, or fracking − involving the high-pressure
injection of water, sand and chemicals deep underground for tapping
more natural gas from dense rock formations − is responsible for a
supply glut that has pressured natural gas prices to hit a decade
low level. Despite the collapse in natural gas prices, Exxon
expects unconventional gas to play a dominant role in future
supplies owing to the rapid decline in conventional production.
We maintain our Neutral recommendation on ExxonMobil for the
long term. The company, which competes with
Chesapeake Energy
(
CHK
), holds a Zacks #3 Rank, which is equivalent to a Hold rating for
a period of one to three months.
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