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.
One such example is Newlight Technologies, LLC. As stated on its site, Newlight was “founded out of Princeton University and Northwestern University in 2003. Newlight has developed, patented, and commercialized the world’s first commercially-scaled carbon sequestration technology able to produce a high-performance thermoplastics that can match the performance of oil-based plastics and out-compete on price.”
The company has seen recent success and could be a future contender in the bioplastics industry. In an interview with Fox Business, Newlight CEO Mark Herrema asked, “We’ve got a better way to make materials. Why make something from oil when you can make the same performance product from something that we would otherwise be breathing right now, that would go into the air, and reduce the cost?” He further stated that he can save just one customer a billion dollars.
Whether or not this is true or that he’s just blowing hot air is yet to be seen, but Newlight’s recent awards in 2013 might just speak for itself. Newlight was named “Most Innovative Company of the Year,” “Biomaterial of the Year,” “Tech Innovation of the Year” all in 2013, as well as receiving an R&D 100 award.
Exxon faces a choice in determining what path to go down. With the incoming renewable energy sector, hybrid and electric vehicles, and now bioplastics technology, Exxon is having a hard time reducing its exposure to competing sustainable technologies that show great promise and could possibly be inevitable in the face of climate change.