Higher oil price stirs only guarded optimism in Louisiana’s oil patch as uncertainty looms _lowres

Aerial view of the ExxonMobil Refinery in Baton Rouge. 

After about two years of planning, ExxonMobil proposes investing several hundred million dollars in its Baton Rouge refinery to make the site more competitive and position it for a potential major expansion in the coming years.

The projects would collectively modernize the refinery and petrochemical complex to enable the processing of new types of crude oil while reducing environmental emissions at the site. While the total investment is expected to be several hundred million dollars, only $240 million of the amount was disclosed as eligible for potential property tax abatements.

A final investment decision about whether to move forward is expected in 2021 and is partially dependent upon tax breaks being approved. Construction could begin about halfway through the year.

The investment would increase the refinery's flexibility to process different types of domestic crude oil economically, which increases the competitiveness of the site, according to ExxonMobil. The Baton Rouge refinery has some disadvantages compared to industrial sites in Texas, which are closer to highly productive oil fields and their pipelines and have more direct access to the Gulf of Mexico for exporting refined products.

"Every ship that we bring in and out of Baton Rouge is a lot more expensive than the Houston Ship Channel, which is a lot closer to open water. These create structural disadvantages in Louisiana," said Gloria Moncada, the ExxonMobil Baton Rouge Refinery manager. “The project that we’re trying to bring forward is helping to level out that disadvantage to make sure our refinery stays competitive in the Gulf Coast.”

New technology being deployed would enable better extraction of carbon solids from crude oil during the refining process and lower associated costs. After the investment, the refinery would be able to handle crude oil from the Permian Basin in West Texas and oil sands crude from Canada. Plans include a new mooring system that would be more efficient and enable larger ships and cargoes for export of finished products.

On the environmental front, the company plans to reduce emissions of volatile organic compounds by 10% at the refinery.

"Think of this project as a building block, which creates many more opportunities for the complex," Moncada said. “This helps make sure that we stay relevant for the future.”

The investment would lay the foundation for a potential major expansion in the coming years since the new technology introduced at the site would create a new petrochemical feedstock.

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The modernization project would support 600 construction jobs each year between 2021 and 2023. There are no new permanent jobs tied to the proposed project. 

ExxonMobil has 1,300 existing jobs, which include engineers, operators and technicians working at the refinery. The business expects to hire about 20 north Baton Rouge residents through its free training program through 2023 in conjunction with the upgrades. The company expects to generate $5 million in sales taxes in 2021.

The company is seeking economic incentives tied to the projects, including $20 million through the Industrial Tax Exemption Program over a 10-year period, which means $40 million in property taxes paid during the lifetime of the plant. If approved by local government entities in Baton Rouge, the project would still generate $6.7 million for the Sheriff's Office, $20 million in property taxes for East Baton Rouge Parish and $21.9 million for the East Baton Rouge School District. ExxonMobil also is expected to use the state's workforce development training program FastStart.

The final investment decision hinges on whether ExxonMobil's ITEP request is approved, Moncada said.

The coronavirus pandemic was a major blow to energy sector demand, about five times greater than the decline during the Great Recession in 2008. As a result, ExxonMobil told investors earlier this year that it would reduce its capital expenditures by 30%, alongside layoffs that mostly have been on the corporate side of the company. With capital expenditures limited, the proposed project in Baton Rouge is more streamlined than initial plans, Moncada said. 

ExxonMobil is still working on a different Baton Rouge investment, a $500 million polypropylene production expansion, which has slowed somewhat due to the pandemic. 

ExxonMobil is more than two-thirds through its $20 billion capital investment commitment for the U.S. Gulf Coast expansion efforts. Much of the previously disclosed investment has been in Texas rather than Louisiana.

Email Kristen Mosbrucker at kmosbrucker@theadvocate.com.