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Exxon Plans U.S. Ethylene Plant to Make Use of Cheap Gas

Exxon Mobil Corp., the largest U.S. oil company, plans to build factories that produce ethylene and plastics in Texas, joining a growing group of competitors racing to use U.S. natural gas to make chemicals.

A new plant at the company’s site in Baytown would produce 1.5 million metric tons of ethylene annually starting in 2016, pending regulatory approvals, Irving, Texas-based Exxon said today in an e-mailed statement. The gaseous chemical would be used to make 1.3 million metric tons of polyethylene plastic at two plants to be built in nearby Mont Belvieu, the company said.

The Houston-area plants would “significantly” increase exports of plastics, Exxon said in the statement. Chevron Phillips Chemical Co. is planning a $5 billion ethylene project at its Baytown site and Dow Chemical Co. is also expanding to use more gas-based raw materials that provide a cost advantage over oil-based production in Europe and Asia.

“The proposed investment reflects Exxon Mobil’s continued confidence in the natural-gas-driven revitalization of the U.S. chemical industry,” the company said in the statement.

Gas prices in New York fell to a 10-year-low in April and have pushed costs for U.S. chemical producers to the lowest outside of the Middle East, Cynthia Werneth, an analyst at Standard & Poor’s, said on a conference call today.

Exxon’s Largest

The ethylene plant would be Exxon’s largest in the U.S. and its first in the country since 1997. The company has two ethylene plants in Baytown with capacities of 1 million tons and 1.2 million tons; a 800,000-ton capacity factory in Beaumont, Texas; and 1-million-ton plant in Baton Rouge, Louisiana, according to Exxon’s 2011 Financial & Operating Review.

The polyethylene plants would increase by 34 percent Exxon’s U.S. output of the resin used to make products such as food packaging and plastics bags, based on data in the company review. Globally, Exxon’s ethylene capacity would increase 17 percent and its polyethylene production would rise 18 percent.

The project would create 10,000 construction jobs and would boost Exxon’s Baytown workforce of 6,500 by about 350, the company said. Margaret Ross, a company spokeswoman, declined to say in a telephone interview how much the project would cost.

Exxon filed applications with Texas and U.S. environmental regulators on May 22.

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