ExxonMobil Talks Climate Change But Ramps Up Petrochemical Biz

ExxonMobil insists it supports the Paris climate agreement. And the company is beginning to prepare for an economic future in which greenhouse gas emissions from vehicles and power plants are significantly lower than they are now. That doesn't mean, though, that ExxonMobil plans to do any less drilling.

In the latest development, ExxonMobil is planning to build what is reported to be the world's largest ethane cracker. It is on track to be constructed in the Corpus Christie area of Texas, unless local protestors succeed in blocking it.

World's largest ethane cracker

For those of you new to the topic, ethane is a component of natural gas and natural gas liquids. It can also be derived from petroleum as part of the refining process. It is used to produce ethylene in a process called cracking, and the facility designed to do that is called an ethane cracker.

The trade organization AFPM (American Fuel and Petrochemical Manufacturers) describes ethylene as "one of the most important chemicals in American manufacturing." Among other uses, it is the main building block in manufacturing plastics. While not a direct, high-volume contributor to global warming, a new ethylene plant causes many concerns for local air and water quality.

That importance is reflected in ExxonMobil's growth plans. In 2014, ExxonMobil announced a major expansion of its petrochemical facility in Baytown, Texas -- indicating that the company intends to capitalize on low shale gas prices over the long run by moving into high-value chemical products. As described by a report in Platts, the expansion includes an ethane cracker and related systems.

Last July, Platts confirmed that ExxonMobil anticipates a "steady increase in chemical demand through 2040." That optimism is reflected in outsized plans for the proposed new facility, which ExxonMobil will build in partnership with Saudi Arabia's Saudi Basic Industries Corp. (SABIC):

"The two companies said earlier this week they are considering locations in South Texas and Louisiana for a proposed multibillion-dollar petrochemical complex anchored by a world-scale ethane-fed steam cracker," Platts found. "The project would feature a 1.8 million metric tons/year ethylene-capacity steam cracker that would feed a monoethylene glycol plant and two polyethylene plants."

Here are more details about the new petrochemical facility from the Houston Chronicle:

"The project could come online as early as 2020, which would coincide with the anticipated rebound in the global petrochemical market, which, like its feedstocks, oil and natural gas, is struggling with a supply glut," wrote Jordan Blum of the Chronicle. "The plan is to take advantage of cheap and ample shale natural gas available here to make chemicals and plastics."

According to Platts, ExxonMobil foresees enough growth in demand to support additional capacity in the future.

On its part, SABIC is consolidating its U.S. activities in Houston with an eye toward global growth.

Who pays up when ExxonMobil doubles down on shale gas?

ExxonMobil has been planning ahead for its transition into petrochemicals and natural gas. The company is historically known for its oil ventures, but by 2012 it was aggressively promoting itself as a natural gas company.

By 2014, when a drop in the price of natural gas was driving other companies out of the market, ExxonMobil was gobbling up shale reserves in the U.S.

That focus on natural gas has made ExxonMobil one of the driving forces behind the decline of the U.S. coal industry. (In 2013, the company also released a study nailing coal for higher lifecycle greenhouse gas emissions, compared to natural gas.)

The company's CEO Rex Tillerson recently left the company in order to pursue a role as Secretary of State under President-elect Donald Trump. He's now being vetted by the Senate, but there is little doubt that he'll be bringing his decades of international business dealings in the extractives sector to the new position if confirmed. This may well include public pressure for the advancement of natural gas resources over coal.

That's a good thing in terms of reducing global warming emissions from power plants. But evidence is beginning to demonstrate that methane emissions along the natural gas supply chain are a significant factor in climate change.

The local impacts of natural gas facilities and fracking operations are also beginning to attract more attention, including complaints of air and noise pollution as well as earthquakes linked to fracking wastewater disposal.

In sum, the proposed new facility will create hundreds of permanent jobs in the Corpus Christie area, but it will generate the potential for new risks and hazards in other communities that host shale gas reserves and infrastructure for transportation and storage.

Adding to the hurt, reports Blum of the Houston Chronicle, much of the output from the plant will not go to create additional jobs in the U.S. manufacturing sector. Most of the output from the new facility is destined for overseas markets:

"The petrochemical complex would include the world's largest ethane cracker, capable of producing 1.8 million metric tons of ethylene annually," Blum wrote.

"The joint venture also would build units to churn out polyethylene, the most common plastic, as well as a unit for monoethylene glycol, which is used in plastics, latex paints, automotive coolants and anti-freeze, according to Exxon. Much of the products would be exported."

About that Texas location...

ExxonMobil and SABIC are apparently still considering two locations in Texas and one in Louisiana. But the latest news indicates that one site just outside of the city of Portland has emerged as a favorite.

As the Corpus Christie Caller-Times reported last month, local officials have not consolidated opposition to the proposed facility, but they are asking the partners to consider another location because the proposed site is about 1.5 miles from the local high school.

Meanwhile, local residents opposed to the plant started a Change.org petition with the following pitch:

"Exxon Mobil and SABIC (Saudi Arabia Basic Industries Corp.) want to build a massive steam cracker plant and a polyethylene plant off of Highway 181 and Wildcat Drive. This petrochemical complex will dwarf the towns of Gregory and Portland, Texas and diminish our quality of life forever ..."

Adding to the tension is the recent water pollution scare in Corpus Christie. The city (population 300,000+) experienced an emergency water use ban last month, resulting from industrial backflow linked to a local refinery.

The New ExxonMobil facility would draw water from local suppliers for both industrial and potable uses.

Photo (cropped): Exxon by Mike Mozart via flickr.com, creative commons license.

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