* 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 (Reuters) - Exxon Mobil Corp isconsidering a multibillion-dollar plan to expand its Beaumont,Texas, refinery into the country's largest, the first majorrefining investment of the U.S. shale oil boom, people withknowledge of the deliberations said.
The expansion of the 344,600 barrel-per-day (bpd) Beaumontrefinery, if carried out, would be completed by 2020 andpotentially double its size with the addition of a third crudedistillation unit (CDU), the sources said. More modest near-termprojects to renew and expand so-called coking units to helprefine more heavy crude already are under way, they said.
If Exxon presses ahead, the investment would be a furtherindication that the American oil giant is breaking ranks withmany of its big global rivals, who have been looking to sell offrefining assets across the world. Just weeks ago Exxon unveileda $1 billion investment in its Antwerp plant.
An Exxon spokesman, while declining to discuss possibleplans for the Beaumont refinery, said the company was alwaysevaluating growth options.
"We regularly evaluate our global portfolio of businessesand opportunities for growth, depending upon the fit with itsstrategic business objectives," Exxon spokesman Todd Spitlersaid. "We take a disciplined long-term approach to investing,regardless of the economic cycle."
A bigger Beaumont would bolster the U.S. Gulf Coast'sposition as a top global supplier of gasoline and diesel at atime when domestic demand is falling. Profits for Gulf Coastrefiners have swollen as cheaper North American crude allowsthem to capture big margins when exporting refined products.
U.S. oil production has embarked on an unprecedented 50percent rise over the past four years as new drilling techniquesallowed oil to flow from vast shale reserves in North Dakota andTexas - this after two decades of seemingly irreversibledecline.
The sources said Exxon already was moving forward on plansto replace four coking unit drums in 2015 and add two new cokerdrums in 2017 at the Beaumont refinery. The drums turn residualcrude oil into petroleum coke, a coal substitute.
Exxon announced plans on July 2 to invest $1 billion tobuild 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 billionin upgrades to the Antwerp refinery.
Exxon's Antwerp investments in some ways bucked a trend inrecent years that has seen major integrated oil companies cutrefining capacity with BP selling plants in Texas andCalifornia and Royal Dutch Shell shutting a refinery inAustralia.
THIRD CDU
The Beaumont refinery has two CDUs that do the initialrefining of crude oil coming into the refinery and providefeedstock for all other units.
Exxon officials are considering boosting the Beaumontrefinery's size to at least 500,000 bpd, which is close to thecapacity 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 isconsidering making the Beaumont plant bigger than Motiva's PortArthur refinery.
"They've talked between 700,000 and 800,000 bpd in totalrefinery capacity," one of the sources said.
Andy Lipow, president of Lipow Oil Associates LLC, a Houstonconsultancy, said an Exxon expansion could boost profits.
"Given the increase in North American oil production and inconjunction with the low operating cost due to the price ofnatural gas, it seems increasing the capacity of oil refiningfacilities makes a lot of sense," Lipow said.
Beaumont Mayor Becky Ames said she had not been informed ofany plans by Exxon to expand the Beaumont refinery.
But she said the expansion would lead to more direct andindirect jobs for the area, which she said benefits fromregional oil refining and petrochemical plants.
"When they do an expansion anywhere in the area it not onlymeans more jobs from the work itself, but it creates spin-offbusinesses in the community," Ames said.
The two other most recent major expansions of Gulf Coastrefining capacity - at Motiva's Port Arthur refinery andMarathon Petroleum Corp's Garyville, Louisiana, plant-were planned before the sudden rise in shale output startedabout seven years ago.
Motiva, a joint venture between Shell and Saudi Aramco, invested $10 billion to expand its Port Arthurrefinery from 285,000 bpd. In addition to a 325,000 bpd CDU, theproject 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. Therefinery has optimized performance of its units to increaseproduction to 522,000 bpd. (Reporting by Erwin Seba; Editing by Terry Wade, Jan Paschaland Howard Goller)
