Can Exxon Mobil Conquer a New World of Plastics?
Already the largest natural gas producer in the U.S., Exxon Mobil (NYSE:XOM) is doubling down with plans of entering the world of plastics.
Announced last year, Exxon plans to expand its Baytown, Texas facility to convert natural gas into polyethylene. One of the most common plastics in the world, polyethylene is known for its use in plastic bottles but can also be used in kitchen bags, wraps, industrial piping, and numerous other products.
A relatively new trend with the rise in price of crude oil streams and the low price of natural gas, Exxon could be poised to take the lead in the natural gas-to-plastic industry.
However, despite what may look like a diversification of revenue for its natural gas plays, Exxon is treading dangerous waters by exposing itself to the same type of risks the rest of its portfolio is vulnerable to. A large portion, if not all, of Exxon’s portfolio is exposed to the potential shifts in industry and politics regarding climate risk.
While it could possibly be an important source of revenue down the line, this transition into plastics leaves Exxon open to the emerging technology of bioplastics, a technology that is showing increasing promise and could significantly reduce the lifetime of gas-to-plastic plants, especially if gas prices rise.