XOM Exxon Mobil Corp

By Bradley Olson and Ahmed Al Omran 

Exxon Mobil Corp. is considering a major new petrochemical complex on the U.S. Gulf Coast that would be developed as a joint venture with Saudi Basic Industries Corp., one of the biggest chemical companies in the world.

Monday's announcement is another signal that energy companies continue to find potential investment opportunities even as oil and natural gas prices remain depressed.

The project, if developed, would be located in Texas or Louisiana near abundant supplies of cheap natural gas, the companies said. It would also include a stream cracker, which is capable of producing the chemicals used to make plastic products from football helmets to bulletproof vests.

No final investment decision has been made yet. The companies plan to carry out further studies and consult with state and local officials to help identify a potential site. Neither company disclosed how much such a complex would cost.

A Gulf Coast chemical plant on this size and scale could compete internationally with other similar projects around the world, said Neil Chapman, president of ExxonMobil Chemical Co.

"That is vitally important as most of the chemical demand growth in the next several decades is anticipated to come from developing economies," he said.

Major energy and chemical companies have completed or are planning about 250 such projects around the U.S. valued at a collective $160 billon, according to the American Chemistry Council.

Hydraulic fracturing of wells around the U.S. has unleashed new natural gas reserves, making the country an ideal location for petrochemical operations that use gas as a feedstock to make plastics. U.S. oil and gas drilling has revitalized the American chemical industry in recent years.

Royal Dutch Shell PLC last month said it would move forward with a multibillion petrochemical complex near Pittsburgh, close to the Marcellus and Utica shale gas fields. That plant is projected to cost $6 billion.

Sabic is the state-run chemical company is Saudi Arabia. Exxon and Sabic have worked together for 35 years in other chemical joint ventures in the Middle East.

"We are focused on geographic diversification to supply new markets," said Yousef Abdullah Al-Benyan, SABIC vice chairman and chief executive officer.

Saudi Arabia is seeking to diversify its economy away from oil and plans to hold an initial public offering for a portion of its state-run oil-production company, Saudi Arabian Oil Co., also known as Aramco. Over the last decade, that company has made significant investments in refining as well as chemical operations around the world.

Write to Bradley Olson at Bradley.Olson@wsj.com and Ahmed Al Omran at Ahmed.AlOmran@wsj.com

(END) Dow Jones Newswires

July 25, 2016 12:55 ET (16:55 GMT)

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