20 July 2009 00:00 [Source: ICB]
Brazil is ready to take a giant leap forward in petrochemicals and plastics, but can it find partners for the $8.4bn Comperj project?
LOADED WITH huge new offshore oil and gas discoveries, Brazil is ready to give a big boost to its petrochemical and plastics industry. Supported by a stable, business-friendly government, a growing domestic economy and strengthening ties with major countries, the industry has the opportunity to take a giant leap forward.
"Four consecutive presidential terms of economic stability have placed Brazil on a steady growth path. The long-term efforts to discover domestic hydrocarbon sources have finally paid off, and Brazil now will be able to support its mature economy with abundant hydrocarbons," says Jorge Buhler-Vidal, director of US-based Polyolefins Consulting.
While Brazil's economy slowed along with the rest of the world in late 2008 and will take a hit in 2009, the outlook is better than for most other countries. The International Monetary Fund (IMF) projects that Brazil's real GDP will fall by 1.3% in 2009, but then increase by 2.2% in 2010. That compares with a projected 2.6% decline in the US and a 3.2% fall in the euro zone in 2009.
The Tupi offshore oil and gas discovery in November 2007 by Brazilian state-operated oil company Petrobras was reportedly one of the largest in the preceding 20 years. The area is estimated to contain 5-8bn barrels of recoverable light oil and gas.
Petrobras aims to produce up to 1.8m bbl/day of oil from the Tupi field by 2020, bringing overall production to 5.1m bbl/day versus 1.85m bbl/day in 2008. In the intermediate term, the company is aiming for production of 3.6m bbl/day by 2013.
Brazil also plans to invite international energy companies to bid for concessions in its pre-salt oil fields as early as 2010. The pre-salt oil fields, in which the Tupi discovery lies, are said to contain as much as 80bn bbl of oil under a thick layer of salt beneath the ocean floor.
In January, Petrobras boosted its five-year investment plan to $174bn (€124bn) for 2009-2013 - up by 55% from its previous plan to invest $112bn from 2008-2012.
"The new oil and gas discoveries provide a comfortable certainty that Brazil will have access to energy and feedstock sources under its control," says Buhler-Vidal. "Brazil will have light oil feedstock from Tupi to complement already available heavy oil from the Campos Basin."
COMPERJ THE CENTERPIECE
The centerpiece of Brazil's petrochemical ambitions is Petrobras's planned $8.4bn Complexo Petroquimico do Rio de Janeiro (Comperj) project.
The basic petrochemical unit, budgeted at $5.2bn, will process 150,000 bbl/day of heavy oil to produce 1.3m tonnes/year of ethylene, 850,000 tonnes/year of propylene, as well as paraxylene (PX), benzene and butadiene (BD), notes Buhler-Vidal. The second-generation units, budgeted at $3.2bn, are slated to produce 800,000 tonnes/year of polyethylene (PE), 850,000 tonnes/year of polypropylene (PP), styrene, ethylene glycol (EG), purified terephthalic acid (PTA) and polyethylene terephthalate (PET).
While Petrobras aims to complete Comperj in 2012, there has been widespread speculation that the project will be delayed because of difficulty in attracting partners. Most analysts peg start-up at 2013 at the earliest.
"Quattor, Braskem and Grupo Ultra, who championed the initial concept, continue to be interested, but [so far have not] committed to Comperj's second-generation units," says Buhler-Vidal. "These companies remain uninterested in investing at the refinery and basic petrochemical production level. Petrobras continues to insist that partners must also participate in the basic products unit."
In June, Brazilian fuel and chemical firm Grupo Ultra said it would not invest in the basic petrochemical unit, but could be interested in second-generation units.
However, Petrobras does not rule out building the basic unit on its own. "Our large petrochemical complex in Rio with eight planned plants is due to come on line in 2012," said CEO Jose Sergio Gabrielli de Azevedo at a press conference at the New York Stock Exchange (NYSE) in May.
WANTED: INTERNATIONAL PARTNER
The Comperj project could provide an opportunity for an international chemical company to gain big exposure to Brazil's market.
"The Comperj project is well beyond the no-return point, as many social and monetary commitments have been made," says Buhler-Vidal. "This appears to be a wonderful opportunity for a non-Brazilian company to enter the Brazilian market with Petrobras's support."
This could include Japanese chemical companies, such as Sumitomo Chemical, Mitsubishi Chemical or Mitsui Chemicals, as well as Middle Eastern firms such as Saudi Arabia's SABIC or Abu Dhabi's International Petroleum Investment Co, said the consultant.
"It would likely be companies that would not pose complications. For example, a Venezuelan partnership could be too politically complicated," says Buhler-Vidal.
And while Petrobras and Chinese major Sinopec in May signed a broad memorandum of understanding to cooperate in oil and gas exploration, refining and petrochemicals, a major investment in Comperj from China is not likely, he notes. "You don't really see the Chinese companies being active sellers in Latin America," says Buhler-Vidal. "Their big interest is to get access to oil - not necessarily to sell polyethylene in Brazil."
In May, local newspaper O Estado de Sao Paulo quoted Petrobras supply and refining director Paulo Roberto Costa as saying the company was negotiating with 10 US, Asian and European companies, and that it would also reach agreements with Brazilian firms. "We will carry on with the project," Costa said. "We either build a new petrochemical complex, or Brazil will be a huge importer of resins."
NET IMPORT POSITION
Despite a significant boost in petrochemical and plastics production over the past decade, Brazil is still a net importer of plastics.
Brazil produced 5.14m tonnes of processed plastic products in 2008, up by 5.4% from 2007, according to industry association Abiplast. The country exported 332,000 tonnes of processed plastic products at a value of $1.39bn (+17.5%), while it imported 487,000 tonnes, worth $2.39bn (+30.4%).
Exports mainly went to South America's Mercosul region (33%), while the EU accounted for 13% of exports, according to Abiplast. Markets included Argentina (26%), the US (14%), Chile (7%), the Netherlands (6%) and Venezuela (5%). The main exports were biaxially-oriented polypropylene films, plastic laminates and plastic tubes.
"I don't see Brazil becoming an export powerhouse in petrochemicals in the near future. Brazilian companies are also investing in plants in other countries such as Venezuela and Peru," says Buhler-Vidal. "So they may get bigger, but not necessarily in Brazil."
In Brazil's domestic market, there is further potential for growth, given that plastic consumption per capita was 26.9kg in 2007 - still below the worldwide average of around 30kg and just one-third of the consumption in North America, Western Europe and Japan, according to a report on the trade show Brasilplast 2009 by Swiss Business Hub Brazil in May.
The biannual Brasilplast show in Sao Paolo in May attracted 63,168 visitors and 1,302 exhibitors - a slight increase over 2007's figures of 62,787 visitors and 1,294 exhibitors.
"The mood was both sober and optimistic, and perhaps more intense and active than ever before," says Buhler-Vidal. "The general feedback was that many commercial contacts and transactions were initiated or carried out."
But while there is optimism about a recovery from the collapse in demand in late 2008, a sustainable economic recovery could be slow to materialize.
"People tend to grasp at straws, taking any slightly positive news as a sign that the situation is turning for the better," says Buhler-Vidal. "But it is more realistic to expect that the crisis will continue progressing and will only turn around in 2010, at best, to start a slow recovery."
Aside from Comperj, a number of other smaller projects are moving forward. Braskem is working on green ethylene, propylene and polymers projects, as well as polyvinyl chloride (PVC) expansions. And PetroquimicaSuape (a venture led by Petrobras) has a new reais 4bn ($2bn) PTA and PET complex that is scheduled to come on stream in November 2010.
Petrobras is also building the Abreau e Lima refinery (Nordeste Refinery) in Northeastern Brazil with Venezuelan state-owned oil company PDVSA as a partner.
"The domestic increase in petrochemical capacity will continue to accompany Brazil's industrial growth rather than exceed it," says Buhler-Vidal. "There will be new projects, some quite big - not for direct exports but to support production of value-added products to be exported."
POINT OF NO RETURN
Petrobras has made a big public commitment to the $8.4bn Comperj project, making it exceedingly difficult to walk away now.
The company has already spent over $500m on engineering and site preparation. Plus, it has been training the local population near Itaborai in anticipation of the Comperj project.
The prefecture of Itaborai estimates that the Comperj project, which will encompass an area of 1,033 acres (418ha), will result in the creation of 212,000 direct and indirect jobs as it spurs consumer goods manufacturing in the region.
"This is supposed to provide many jobs, and Petrobras has already started training the local population as electricians and welders, to participate in the construction phase. The plan is to then absorb them into plant operations," says Buhler-Vidal. "They are building roads and technical schools - essentially they are creating an entire metropolitan area around this petrochemical complex."
MAJOR PETROCHEMICAL PROJECTS IN BRAZIL, 2010-2014
|Company||Product||Capacity ('000 tonnes/year)||Location||Start-up year||Budget ($m)||Status|
|Braskem||PVC expansion||250-440||Camacari||2014||Not available||Planned/under study|
|green propylene||Triunfo||2012||Not available||Planned/under study|
|green ethylene||200||Triunfo||2011||Not available||Planned/under study|
|PVC expansion||240-440||Marechal Deodoro||2011||350||Approved/underway|
|Copebras||phosphoric acid expansion||300||Catalao||2012||1,000||Approved/underway|
|Coquepar||calcined petroleum coke||350||Catalao||2011||281||Approved/underway|
|calcined petroleum coke||350||Rio Negro||2011||278||Approved/underway|
|Dow - Cristalserv||green ethylene||350||To be determined||1,000||On hold|
|Petrobras - Petroquimica Suape||PTA||700||Ipojuca||2010||2,000||Approved/underway|
|Petrobras & PDVSA - Nordeste Refinery (Refinaria Abreu e Lima)||diesel||Not available||Porto de Suape||2011||4,050||Approved/underway|
|Petrobras & others - COMPERJ (basic petrochemicals)||ethylene, propylene||1,300||Itaborai||2013||5,200||Approved/underway|
|p-xylene, benzene, butadiene||881|
|Petrobras and others - Comperj||styrene||500||Itaborai||2013||3,200||Planned/under study|
|Solvay Indupa||green ethylene||60||Santo Andre||2010||300||Planned/under study|
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