Exxon Mobil Corporation (XOM - Free Report) recently announced that the company has decided to move ahead with a new-build petrochemical complex in San Patricio County, TX, as it has received the final environmental regulatory approval this month. The facility will likely process output from the Permian Basin’s booming hydrocarbon wells.
ExxonMobil is partnered by Saudi Basic Industries Corp. or SABIC in the project, which is located near Corpus Christi. The 50-50 joint venture is named as Gulf Coast Growth Ventures. Per the permit documents filed with the Texas Comptroller's Office, the project is expected to cost $9.4 billion. It will have a 1.8 million metric ton ethane cracker. ExxonMobil received the final environmental regulatory nod this month for two polyethylene units and a monoethylene glycol unit.
The facility is planned to convert ethane and propane to ethylene, which is basically a chemical used for making plastics, antifreeze and several other products. The output from the facility is expected to satisfy demand from markets like automotive coolants, packaging, agricultural film and building, as well as construction and clothing. While construction work is expected to commence in third-quarter 2019, the facility will likely come online by 2022.
Notably, with Permian producers boosting oil production, output of gas and liquid by-products is on the rise, in turn providing cheap chemical feedstocks. This phenomenon will increase the joint venture’s profits through a reduction in production costs. The project makes huge sense as Chief Economist of BP plc (BP - Free Report) , Spencer Dale pointed out earlier that global energy demand growth will be dominated by petrochemicals over the next two decades. To strengthen the petrochemicals business, ExxonMobil had earlier approved major expansions to the Baytown petrochemical complex and Beaumont refinery. The company also has plans to enhance the Louisiana plastics unit.
ExxonMobil expects the project to generate $50 billion of economic benefits within the first six years after it comes online. Also, it is estimated to generate more than 600 permanent jobs, which will provide annual salaries of $90,000 per annum on average. During the construction period, the project will create 6,000 high-paying jobs and economic output of $22 billion.
McDermott International, Inc. (MDR - Free Report) and three other engineering, procurement and construction companies will lead the construction of the facility.
The largest publicly-traded energy company has gained 9.5% year to date compared with 5.1% collective growth of the industry it belongs to.
Zacks Rank & Stock to Consider
Currently, ExxonMobil has a Zacks Rank #3 (Hold). A better-ranked player in the energy space is Chevron Corporation (CVX - Free Report) , which has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron’s earnings growth for second-quarter 2019 is projected at 14.6%.
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