InterviewBraskem's Venezuela project on track

16 February 2008 00:22  [Source: ICIS news]

By Jasmina Kelemen

CARACAS (ICIS news)--Brazil's Braskem remains committed to its goal of rivalling the Middle East with a strategic partnership in Venezuela, president and CEO Jose Carlos Grubisich said on Friday.

"This will be the most competitive petrochemical project of the Americas, including North America, and this is going to change the landscape of the petrochemical industry in our region," he said in an interview with ICIS news.

Braskem's partnership with state-run Petroleos de Venezuela (PDVSA) subisidiary Pequiven will spur development of regional transformers in a second wave once Venezuela's ethane feedstock supplies can be tapped for the petrochemical industry.

In addition to its $3.2bn (€2.2bn) Jose Petrochemical Complex project to develop world class polypropylene (PP) and polyethylene (PE) production in partnership with Pequiven, Braskem will supply ethylene for chlorine, caustic soda and polyvinyl chloride (PVC) production, he said.

The abrupt departure of Exxon Mobil and Conoco in the midst of President Hugo Chavez’s nationalisation drive had fueled speculation from some observers that Braskem might also pull out. Not so, Grubisich said.

“We've been very creative and flexible to accommodate the ambitions of both companies,” Grubisich said by telephone from his office in Sao Paulo, Brazil.

Both companies agreed to take a 49% stake in the joint venture with another private partner holding the remaining 2% stake. “It's the same as a 50-50 joint venture.”

Grubisich declined to name the partner, saying only that it would operate as an exporter and would not influence strategic decisions between the principal shareholders. The shareholder would be “something like a trading company”, he said.

Venezuela’s domestic market remains the top priority for Jose's output. Venezuela's planned “petrochemical revolution” will encourage Latin American customers to convert PE and PP in Venezuela to add value locally. 

However, another natural market for the project will be transformers in Central America and potentially Colombia who can transform PE and PP into finished products and take advantage of tariff-breaks for exports into the US, he said.

Ultimately, Braskem's ability to compete with low-cost Middle Eastern suppliers for the lucrative North American market was the benchmark of negotiations, he said.

Grubisich said that with most suppliers moving to the Middle East, North America will be a net importer in the next few years and his company must be able to compete. Braskem is the largest petrochemical producer in Latin America.

"That was the base of our discussions for our supply agreements with Pequiven and PDVSA, that we will have the same kind of capacity, most updated technology and the raw materials we need to compete with the big guys in the Middle East," he said.

Grubisich also believes that the project's success will provide a reference for others hoping to cooperate on projects in Venezuela and in the long run identify more opportunities for joint ventures projects.

Braskem continues to evaluate other possibilities in South America, but none of the other discussions are as advanced.

Grubisich confirmed press talk that Braskem is evaluating the possibility of building a PE plant in Peru to target the Pacific coast of North and South America. He said talks are underway with different feedstock suppliers including Petrobras of Brazil, Petroperu of Peru and Pluspetrol of Argentina.

“We think we can have enough feedstock to build a very competitive project in Peru," if the company is successful with its bid, he said. If all goes well, the project could go forward as soon as 2013.

Also on the radar is a petrochemical plant in Bolivia that would target Brazil and other markets of the southern cone. Braskem has signed memorandums of understanding with both of the main feedstock suppliers in Bolivia but says the necessary guarantees are not in place yet to move forward with a project.

To build a viable project in the landlocked nation, Braskem would need at least 30 million cubic meters a day of natural gas for 20 years.

"We keep looking, we keep discussing, but we're not there yet."

($1=€0.68)

By: Jasmina Kelemen
+1 713 525 2653

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