INSIGHT: Latin America’s shale gas, pre-salt crude to lift petchems

23 March 2012 16:28  [Source: ICIS news]

By Joseph Chang

Brazil offshore oil rig 2NEW YORK (ICIS)--The spotlight on petrochemical investment in the Americas has shone on the US shale gas boom and the resulting rash of planned new ethane crackers that could add about 32% to existing US ethylene capacity by 2017–2018.

But Latin America’s game changer could be Brazil’s pre-salt oil and gas bounty, as well as shale gas formations in Argentina.

Naphtha crackers today are not competitive compared to their ethane counterparts – a fact acknowledged by Isabel Figueiredo, director of Brazil-based petrochemical producer Braskem, who spoke at the 6th EBDQUIM conference in Praia do Forte, Brazil, hosted by Associquim (the Brazilian association of chemical and petrochemical distributors) and Sincoquim (the Sao Paulo state industry association) in mid-March.

Braskem is already preparing to build a 1.05m tonne/year ethane cracker in Mexico through Braskem Idesa, its 60:40 joint venture with Mexico’s Grupo Idesa. The project, with associated polyethylene units, is expected to be complete by mid-2015.

Its next big undertaking will be Comperj in Rio de Janeiro – the long-anticipated and delayed project with state oil company Petrobras which is expected to be the largest petrochemical complex in Latin America. Braskem will seek to define the scope of Comperj in 2012.

The ultimate success of the project is likely be tied to Petrobras’s development of its giant offshore ‘pre-salt’ oil and gas reserves that lie underneath an extensive layer of salt that can be as much as 2,000m thick. This is estimated to contain up to 10bn barrels of oil equivalent (oil and gas).

Petrobras plans to invest a total of $225bn (€171bn) in the 2011–2015 period, mostly on exploration and production. This could significantly boost natural gas production, providing cheap ethane feedstock for petrochemicals.

Meanwhile, Argentina will start to aggressively develop its large shale gas reserves. In February, its largest energy company, YPF, raised its estimate for shale oil and gas reserves from less than 1bn bbl, to 22.8bn bbls.

YPF, majority-owned by Spain’s Repsol, is under heavy government pressure to quickly develop its oil and gas reserves, as falling production has led to greater imports.

Natural gas shortages in 2010 from a cold winter led to severely curtailed production at petrochemical operations in Bahia Blanca, including those of US-based Dow Chemical.

And Canada-based Methanex, which has methanol operations in neighboring Chile, is relocating one of its four plants from there to Louisiana, USA, because of lack of natural gas supply. Already three plants are idle.

Development of shale gas in Argentina and the pre-salt oil and gas reserves off the coast of Brazil could go a long way to making Latin America more competitive in petrochemicals.

($1 = €0.76)

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Author: Joe Chang

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