* Targets exports of fuel to foreign markets
* Total size could be up to 800,000 bpd
* First major U.S. refinery project since shale boom
(Adds reactions from refinery consultant, mayor)
By Erwin Seba
HOUSTON, July 25 Exxon Mobil Corp is
considering a multibillion-dollar plan to expand its Beaumont,
Texas, refinery into the country's largest, the first major
refining investment of the U.S. shale oil boom, people with
knowledge of the deliberations said.
The expansion of the 344,600 barrel-per-day (bpd) Beaumont
refinery, if carried out, would be completed by 2020 and
potentially double its size with the addition of a third crude
distillation unit (CDU), the sources said. More modest near-term
projects to renew and expand so-called coking units to help
refine more heavy crude already are under way, they said.
If Exxon presses ahead, the investment would be a further
indication that the American oil giant is breaking ranks with
many of its big global rivals, who have been looking to sell off
refining assets across the world. Just weeks ago Exxon unveiled
a $1 billion investment in its Antwerp plant.
An Exxon spokesman, while declining to discuss possible
plans for the Beaumont refinery, said the company was always
evaluating growth options.
"We regularly evaluate our global portfolio of businesses
and opportunities for growth, depending upon the fit with its
strategic business objectives," Exxon spokesman Todd Spitler
said. "We take a disciplined long-term approach to investing,
regardless of the economic cycle."
A bigger Beaumont would bolster the U.S. Gulf Coast's
position as a top global supplier of gasoline and diesel at a
time when domestic demand is falling. Profits for Gulf Coast
refiners have swollen as cheaper North American crude allows
them to capture big margins when exporting refined products.
U.S. oil production has embarked on an unprecedented 50
percent rise over the past four years as new drilling techniques
allowed oil to flow from vast shale reserves in North Dakota and
Texas - this after two decades of seemingly irreversible
The sources said Exxon already was moving forward on plans
to replace four coking unit drums in 2015 and add two new coker
drums in 2017 at the Beaumont refinery. The drums turn residual
crude oil into petroleum coke, a coal substitute.
Exxon announced plans on July 2 to invest $1 billion to
build a delayed coking unit at its 320,000 bpd Antwerp, Belgium,
refinery so the plant could refine cheaper high-density,
high-sulfur crude oils. That was on top of a previous $1 billion
in upgrades to the Antwerp refinery.
Exxon's Antwerp investments in some ways bucked a trend in
recent years that has seen major integrated oil companies cut
refining capacity with BP selling plants in Texas and
California and Royal Dutch Shell shutting a refinery in
The Beaumont refinery has two CDUs that do the initial
refining of crude oil coming into the refinery and provide
feedstock for all other units.
Exxon officials are considering boosting the Beaumont
refinery's size to at least 500,000 bpd, which is close to the
capacity of the company's Baton Rouge, Louisiana, refinery.
The country's biggest refinery is Motiva Enterprises LLC's
600,250 bpd Port Arthur, Texas, plant. Exxon is
considering making the Beaumont plant bigger than Motiva's Port
"They've talked between 700,000 and 800,000 bpd in total
refinery capacity," one of the sources said.
Andy Lipow, president of Lipow Oil Associates LLC, a Houston
consultancy, said an Exxon expansion could boost profits.
"Given the increase in North American oil production and in
conjunction with the low operating cost due to the price of
natural gas, it seems increasing the capacity of oil refining
facilities makes a lot of sense," Lipow said.
Beaumont Mayor Becky Ames said she had not been informed of
any plans by Exxon to expand the Beaumont refinery.
But she said the expansion would lead to more direct and
indirect jobs for the area, which she said benefits from
regional oil refining and petrochemical plants.
"When they do an expansion anywhere in the area it not only
means more jobs from the work itself, but it creates spin-off
businesses in the community," Ames said.
The two other most recent major expansions of Gulf Coast
refining capacity - at Motiva's Port Arthur refinery and
Marathon Petroleum Corp's Garyville, Louisiana, plant
-were planned before the sudden rise in shale output started
about seven years ago.
Motiva, a joint venture between Shell and Saudi Aramco
, invested $10 billion to expand its Port Arthur
refinery from 285,000 bpd. In addition to a 325,000 bpd CDU, the
project added multiple units and was completed in 2012.
Marathon invested $3.9 billion to boost its Garyville,
Louisiana, refinery from 256,000 bpd to 436,000 bpd in 2009. The
refinery has optimized performance of its units to increase
production to 522,000 bpd.
(Reporting by Erwin Seba; Editing by Terry Wade, Jan Paschal
and Howard Goller)