Exxon Mobil planning multibillion-dollar Gulf Coast expansion

Dive Brief:

Exxon Mobil Corp. is considering a multibillion-dollar expansion of its U.S. Gulf Coast facilities that could double the region's light crude refining capabilities and make its Beaumont, Texas, location the largest refinery (by capacity) in North America, according to The Advocate.
The expansion would allow the company to keep up with the need for refineries as U.S. shale oil production increases. Energy experts have said that at the current pace, existing refinery capacity could be exhausted in the next few years without additional capacity. If Exxon Mobil decides to move forward with the project, it is expected to generate 1,850 temporary construction jobs starting in 2019.
This latest investment is in addition to the $20 billion Exxon Mobil has already committed for new Gulf Coast refineries, as well as for more chemical and export facilities, during the next 10 years. The Gulf Coast plan is part of an even larger $50 billion U.S. strategy that will see the company build manufacturing plants and otherwise increase its presence nationwide during the next five years.

Dive Insight:

The U.S. Gulf Coast region, according to the U.S. Energy Information Administration, is home currently to more than 45% of the country's petroleum refining capacity and 51% of all U.S. natural gas processing, making it a hub for energy infrastructure construction.

However, those along the Gulf Coast are concerned that energy companies could pull the plug on big projects, according to the Greater Baton Rouge Business Report, if they are forced to pay a premium for steel and aluminum because of the Trump administration's new tariffs on those materials, 25% and 10% respectively. And even small price increases for the material used on a $10 billion, steel-intensive project could raise overall costs enough to make owners put their plans on hold, experts told the Business Report.

One of those affected projects could be the $10 billion ethane steam cracker plant that Exxon Mobil and joint venture partner Sabic are planning in the Corpus Christi area of Texas. Construction on that facility won't begin until 2019, but it is already in the pre-construction phase with more than a dozen contracts let out.

And the concern is not only how much the price for steel used in plant construction will rise, but how much it will add to the price tag of pipeline projects to those plants. For example, according to The Hill, there is some steel piping that is critical to natural gas pipeline construction, but none of it is manufactured in the U.S.; therefore, it could be subject to a tariff if the administration does not allow an exemption. As with energy plants, the price of construction could force a hold on some of these critical projects.