APLA ’08: Ethane key to Mexico petchem project

17 November 2008 20:03  [Source: ICIS news]

RIO DE JANEIRO (ICIS news)--The feasibility of Mexico’s proposed Ethylene XXI petrochemicals project will depend on the price of ethane supplied by state-owned Pemex, delegates said on Monday.

Pemex’s gas division is expected to progress discussions regarding the supply of feedstock for a petrochemicals complex next year, according to industry players attending the 28th Latin American Petrochemical Annual Meeting (APLA).

But the project will only succeed if Pemex offers the gas at a reasonable price. “If a floor is set, and if that floor is too high, no-one will be willing to invest because they won’t be competitive in their end markets,” said Raul Arias, a consultant with US-based Nexant.

Pemex intends to open a bidding process for ethane gas to build an approximately 1m tonne/year cracker plus derivatives plants in Coatzacoalcos in Mexico’s Veracruz state, said Luis Rafael Montanaro Sanchez, strategic planning and business development manager at Pemex Petroquimica, Pemex’s petrochemicals arm.

“Discussions are taking place,” he said. “The project is alive.”

The Ethylene XXI project will be 100% privately owned, and therefore is different from Pemex’s failed Phoenix project, Montanaro Sanchez said.

Mexican petrochemicals majors Idesa, Mexichem and Alpek plan to submit a joint bid. According to Jose Luis Uriegas, Idesa’s chief executive, the selection process was initially scheduled for completion at the end of this year, but completion has now been delayed until the second quarter of 2009.

However, according to some industry observers, the discussions are on hold and are not expected to resume until the second quarter of 2009.

Negotiations to build a major new petrochemicals complex in Mexico have been continuing for years, but Pemex has been unable to provide the feedstock at a suitable price.

Construction of a privately owned petrochemicals plant in Mexico is politically sensitive, observed a consultant who preferred not to be named. The public perception is that allowing a privately owned petrochemicals complex would endanger the national ownership of natural resources, he said, and political activists or the media could potentially “mobilise the masses and stop the project”.

Mexican President Felipe Calderon supports the construction of a petrochemicals complex, but it is a risky position to take, the consultant added.

Mexico desperately need to build new petrochemicals capacity but Pemex does not appear to be encouraging investment in petrochemicals, said Jorge Buhler of Polyolefins Consulting. “The petrochemicals deficit is getting bigger and bigger.”

While Brazil and Venezuela are strengthening their petrochemicals capabilities, Mexico continues to be hindered by a disconnect between the feedstock supplies and petrochemicals. “Mexico might be missing the window of opportunity,” Arias said.

Mexico’s energy reform, which was recently approved, was not the reform needed to stimulate investment in petrochemicals, Arias said.   

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By: Anna Jagger
+44 20 8652 3214

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