INSIGHT: Latin American projects face delays

25 November 2008 15:08  [Source: ICIS news]

By Anna Jagger


LONDON (ICIS news)--Negotiations on major petrochemicals projects proposed for Latin America are being stalled as a result of the global economic crisis, according to delegates at the APLA regional industry meeting in Rio de Janeiro last week.


Mexico’s state-owned Pemex intends to offer ethane gas for a privately-owned petrochemicals complex, while several projects are planned for Venezuela and a major refinery and petrochemicals project is being developed in Rio de Janeiro state.


Longer term investments are also proposed for Colombia and Peru.


Concerns about falling demand and access to financing are resulting in companies reviewing the timescales for their projects.


“Projects could slide a year or two,” Jorge Buhler of Polyolefins Consulting told delegates at the US consultancy’s pre-APLA conference.


Export-oriented projects, such as the proposed Venezuelan investments, could become harder to justify in the current economic climate, said Buhler.


“But if your market is mainly local, you have a competitive advantage, because you are already there.”


The Comperj project in Rio de Janeiro state, being developed by Petrobras and Grupo Ultra, will target the local Brazilian market. The scheduled start-up date is 2013, but this is likely to slip. 


Mexico, with its large petrochemicals deficit, desperately needs a new petrochemicals project. “The market is not the problem; the problem is getting the feedstock,” said Buhler.


Pemex's planned new project, named Ethylene XXI, will incorporate a 1m tonne/year cracker plus derivatives plants in Coatzacoalcos in Mexico’s Veracruz state.


It will be 100% privately owned, and therefore completely different to the Phoenix project, said Luis Rafael Montanaro Sanchez, strategic planning and business development manager at Pemex Petroquimica, Pemex’s petrochemicals arm.


Negotiations regarding the ethane supply contract were ongoing, added Sanchez. “Discussions are taking place,” he said. “The project is alive.”


The feasibility of the Ethylene XXI project will depend on the price of ethane supplied Pemex, which historically has been reluctant to supply petrochemicals feedstock at a competitive 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.


Mexican petrochemicals majors Idesa, Mexichem and Alpek plan to submit a joint bid for the ethane supply contract, and some international players are understood to be interested.


In Jose, Venezuela, state-owned Pequiven and Brazil’s Braskem are planning two joint venture projects.


These investments face possible delays as a result of the global financial crisis and falling oil prices, said Freddy Salas, a former planning and development manager at Pequiven who will retire in March.


Pequiven, which is also planning an ambitious project in Paraguana, plans to review its investment plan at the end of the year, he said.


Pequiven and Braskem had planned to start up a polypropylene (PP) plant in 2011 and an integrated ethylene and polyethylene (PE) project in Jose at the end of 2012 or the beginning of 2013.


As in Mexico, the proposed projects in Colombia and Peru are at the conceptual stage.


Colombian state-owned petroleum company Ecopetrol plans to raise its PE capacity from 50,000 tonnes/year to 550,000 tonnes/year, while PP capacity could rise from 400,000 tonnes/year to 900,000 tonnes/year, said Mario Hernan Cardozo, Ecopetrol’s director for mergers and acquisitions.


Various options are being considered for the ethylene and PE expansions. Ecopetrol currently has the capacity to produce 50,000 tonnes/year of ethylene and 50,000 tonnes/year of PE at its Barrancabermeja refinery site.


The best option, according to Cardozo, involves construction of a 200,000 tonne/year ethane cracker in the Bogota/Cusiana region, based on natural gas from the Cusiana fields, plus a 700,000 tonne/year naphtha cracker in Barrancabermeja, based on naphtha feedstock from the refinery.


In Peru, gas for an olefins complex would be supplied from the Camisea gas fields. Partners have already been selected for fertilizer and methanol projects, but the olefins complex remains under discussion.


While the timescales for projects and potential projects are likely to be set back, in general, delegates did not believe projects would be cancelled.


Latin Americans are used to crises, and are well placed to weather the storm, said Nexant's Arias, while another Nexant consultant Bob Bauman added: “We don’t see anything cancelled.”


The 29th Latin American Petrochemical Association (APLA) meeting will be held in Mexico City next year.

Listen to the radio interview with Bob Bauman and Raul Arias from Nexant
To discuss issues facing the chemical industry go to ICIS connect

By: Anna Jagger
+44 20 8652 3214

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