Exxon Plans Multi-Billion-Dollar Chemical Plant in Texas

Exxon Mobil Corp. plans to build a multi-billion dollar chemical plant in Texas to take advantage of cheap North American shale gas, according to a U.S. environmental filing seen by Reuters. The plant, which could be online as soon as 2016, would sharply crank up Exxon Mobil’s chemical production capacity and help it compete more effectively with rival Dow Chemical Co.,the largest U.S. chemical maker.

The expansion should create 10,000 construction jobs and boost Exxon Mobil’s permanent work force in Baytown, Texas, by 350 to 6,850, the company said. More than $90 million per year in additional tax revenue and 3,700 extra jobs will be created in the local community, Exxon Mobil estimates.

Construction should begin by next March, according to the filing. Exxon Mobil filed with the U.S. Environmental Protection Agency and Texas officials earlier this month. It expects regulatory approval within the year.

Exxon Mobil’s plant, if approved, will be built at the company’s Baytown complex and is expected to produce 1.5 million tons annually of ethylene, a key material in plastics production. The ethylene will be piped to the company’s nearby Mont Belvieu complex, where it will be used in two planned polyethylene production facilities, each expected to have an annual capacity of 650,000 tons per year.

Exxon Mobil has been North America’s largest natural gas producer since its 2010 purchase of XTO Energy Inc. By using its own natural gas in chemical production– something Dow is not able to do because it does not drill–Exxon Mobil further slashes its costs.

The company had said as recently as last year it had no plans to expand chemical production in the United States. However, decades-low natural gas prices proved too much too resist. Its decision to build the new plant also comes after a recent announcements by Dow, as well as Royal Dutch Shell Plc  and others to expand their own U.S. chemical production.

U.S. natural gas prices have dropped more than 20 percent so far this year. Chemical industry trade groups expect prices to remain low for years due in part to ramped up production from the shale reserves.