Exxon Mobil fires up huge new Texas plant just two months after Harvey hit the Gulf Coast

Key Points
  • Exxon Mobil began production at a new petrochemical facility in Mont Belvieu, Texas.
  • The facility positions Exxon to better compete in the growing global market for plastics.
  • Operations began just two months after Hurricane Harvey pummeled the area, knocking out much of the country's petrochemical processing capacity.
A file photo of workers entering an Exxon Mobil refinery
Patrick T. Fallon | Bloomberg | Getty Images

Exxon Mobil on Tuesday began production at a new petrochemical facility in Mont Belvieu, Texas, just two months after Hurricane Harvey pummeled the U.S. Gulf Coast and hobbled the U.S. refining and specialty chemicals hub.

The new first of two lines turning out polyethylene — the most common plastic used in manufacturing — will increase the plant's output by 650,000 tons per year. The next line at Mont Belvieu will match that addition and bring total production at the plant to 2.5 million tons per year, making it one of the biggest polyethylene plants in the world.

The facility positions Exxon Mobil to take advantage of the growing market at home and abroad for plastics as emerging markets buy more packaged food and consumer products. Demand for ethylene, the base chemical, is poised to grow by 5.5 million to 6 million tons a year, assuming 2.5 to 3 percent GDP growth, according to IHS Markit.

Exxon will ship a "significant portion" of its polyethylene production from the Mont Belvieu plant from the port of Houston.

"The expansion of our Mont Belvieu facility further enhances our ability to meet growing global demand for high-performance polyethylene products around the world," Neil Chapman, president of Exxon Mobil Chemical Co., said in a statement.

Earnings in Chevron's chemicals business grew by nearly $200 million in 2016 to reach $4.6 billion. Chemical earnings ticked down in the first half of 2017.

Since 2010, 301 chemical industry projects worth $181 billion have been announced in the United States, according to the American Chemistry Council, a trade group representing U.S. chemical companies.

The wave of investment is being driven by a boom in U.S. oil and natural gas production, which produces byproducts used in the petrochemical industry. Most of that money is committed to the Gulf Coast.

Exxon Mobil has announced it will invest $20 billion in Gulf Coast chemical, refining, lubricant and liquefied natural gas facilities over the next 10 years. The company aims to create 12,000 permanent jobs.

The Gulf Coast is home to 90 percent of the nation's capacity to turn out basic plastics. The high concentration of petrochemical plants in the area came under scrutiny after Hurricane Harvey knocked out about 60 percent of ethylene and propylene capacity. The two chemicals are the most widely used inputs in the industry.

Blasts at the Houston-area Arkema chemical plant due to flooding from Harvey and reports of pollution from other facilities in the wake of the storm also thrust the industry into the spotlight.

Chevron Phillips Chemical expects to open a new ethane cracker, the final part of a $6 billion petrochemicals project, in Baytown, Texas, by the end of this quarter.

WATCH: John Kilduff says Exxon 'terrifically positioned'

Exxon 'terrifically positioned' in energy sector: Again Capital's John Kilduff
Exxon 'terrifically positioned' in energy sector: Again Capital's John Kilduff