Oil and Gas

Exxon Plans Multi-Billion Dollar Singapore Petro Plant

By Reuters

Exxon Mobil said it will go ahead with building a multi-billion dollar second petrochemical complex in Singapore to start in early 2011, adding to a wave of new projects to meet global demand for plastics.

The new plant will come onstream after a host of export-oriented petrochemical crackers in the Middle East. But analysts said Exxon will absorb most of the petrochemicals produced, relieving the market of excess stocks, while the U.S. major will soak up rising supplies of feedstock naphtha.

"Exxon is a conservative system, and I think they are looking at this new plant as a supplier to their global system rather than just for the Southeast Asian region," said Tony Regan, a Singapore-based consultant at Nexant.

The project by unit ExxonMobil Chemical, which had been widely expected to proceed, will include a 1 million tons per year (tpy) ethylene steam cracker, as well as two 650,000 tpy polyethylene units and a 450,000 tpy polypropylene unit.

Exxon did not give an exact cost, but said it will be a multi-billion dollar project. It will be integrated with Exxon's existing 900,000 tpy cracker on Singapore's Jurong Island petrochemical hub.

The project will come after four new Saudi plants and one in Kuwait add 4.5 million tpy of ethylene production capacity by the end of 2008, and similar volumes to be added between 2009 and 2010 in the Middle East, said petrochemical consultant CMAI.

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Analysts have said the overall extra supplies could weigh on petrochemical margins -- currently around $600 a ton -- by the end of the decade, despite Asian demand growth of 6 percent a year for products such as ethylene and propylene, used as building blocks to make plastics.

They said the new Exxon plant could absorb rising supplies from India of oil product naphtha, used as a feedstock, helping support regional market prices and margins for refining naphtha.

"The plant is huge, and it will take a lot of naphtha supplies plus other feedstocks," said Victor Shum, a Singapore-based analyst at energy consultancy Purvin & Gertz.

Petrochemical producers usually consume three times more naphtha than their ethylene capacity, meaning the proposed plant may have to use up to 3 million tonnes of naphtha per year.

Exxon said it had awarded the design, engineering, procurement and construction contract for the steam cracker recovery unit to U.S.-based Shaw Group Inc.

The engineering contract for the steam cracker furnaces has been awarded to Japan's Mitsui Engineering and Shipbuilding and Heurtey Petrochemical of France.

It awarded engineering contracts for the polypropylene and specialty elastomers units to Mitsui Engineering and Shipbuilding, and contracts for the two polyethylene units to Mitsubishi Heavy Industries Ltd.

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