Petroperu, Petrobras petchem plan eyes mining

25 January 2008 19:34 [Source: ICIS news]

Peru By Jasmina Kelemen

CARACAS (ICIS news)--Petroperu will search for a partner and shift its focus toward the mining sector as part of its strategy for a $1bn (€680m) petrochemical plant it plans to build in the country with Brazil's Petrobras, company President Cesar Gutierrez said on Friday.

"We've had to reorient the project," Gutierrez said in Spanish from his office in Lima during an interview with ICIS news.

The two state oil companies intend to build a 750,000 tonne/year ammonia plant that will mainly produce chemicals for the Andean nation's growing mining sector.

Derivative products under consideration for production include ammonium phosphate, ammonium nitrate, which is used to make explosives, and sodium cyanide, which separates minerals from rock, he said.

Petroperu and Petrobras were forced to shelve plans to also build a 1m tonne/year urea plant alongside the ammonia plant after CF Industries beat the two companies in November 2007 for a natural gas feedstock supply contract from a local consortium led by Pluspetrol of Argentina.

Initial feasibility studies showed that 100m cubic feet/day of natural gas on offer from the Camisea field in southern Peru could feed a plant large enough to cover the country's domestic demand of 300,000 tonnes/year of urea, all of which is currently imported.

The remaining 700,000 tonne/year of urea would have been exported into the Pacific coast of South America to seize market share from less competitive Asian exports, Gutierrez said.

But CF Industries announced they would build a similar plant after securing feedstock from Pluspetrol, forcing Petroperu and Petrobras to change their game plan and target the mining sector with an ammonia plant.

Petroperu and Petrobras were able to move ahead with their petrochemical plans despite having lost in the bidding for Pluspetrol's gas after the Peruvian government announced two weeks ago that Lot 57, an area near the Camisea gas field, contained 2 trillion cubic feet of natural gas. Petrobras is a minority partner in the field.

The ammonia plant will either be located in Marcona, a center for the mining industry, or near the port of Ilo, said Gutierrez.

Gutierrez said financing details are still under discussion, adding that the two firms are looking for a third investment partner.

"We want people to come here and invest and we're also interested in working with the private sector," said Gutierrez.

Though Gutierrez wouldn't specify any names, he said the third partner will likely be a player in the local mining sector, either a Peruvian or international firm that is already importing chemicals for explosives, he said.

Such companies could potentially include Australia's Orica Mining Services and Chile's Enaex, both of which last year expressed interest in investing in ammonia projects.

Government officials in Lima are also actively encouraging investment to develop the local mining industry. Last week, they asked Pluspetrol to make another 50m cubic feet/day of gas available to facilitate an ammonium nitrate plant.

Gutierrez said that amount is not enough to support the size of the plant Petroperu and Petrobras envision and that they will instead focus on gas from Lot 57 for feedstock.

The two companies hope to secure building contracts this year and begin construction by early 2009. The plant should be operational by 2012.

($1.00 = €0.68)

By: Jasmina Kelemen
+1 713 525 2653

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