Price and market trends: Mexico petrochemicals to benefit from US shale gas, reforms

22 November 2012 20:25  [Source: ICB]

Cheap natural gas from the US, a new political era and good demographics are allowing Mexico's chemical industry to become more competitive.

"The first 10 months of the year, the average price we paid for natural gas imported from the US was less than $3/MMBtu," said Asociacion Nacional de la Industria Quimica (ANIQ) president Miguel Benedetto Alexanderson, at the Latin American Petrochemical Association (APLA) annual meeting.

Jose Luis Uregas

 "I see [Nieto] very committed to energy. He will put a lot of political capital into energy reform"

Jose Luis Urigas
CEO, Grupo Idesa

Mexico has been able to benefit from low natural gas prices in the US, which have fallen below $4/MMBtu from the double digits just five years ago.

US gas production increased by 25% in five years to 65.3bn cubic feet/day feet in July, according to the US Energy Information Administration.

"Certainly this has greatly hiked our competitiveness in the chemical industry, helping us to attract investments and talent in Mexico," Benedetto Alexanderson added.

He also said energy reform should follow the nation's elections. Recently elected Mexican President Enrique Pena Nieto has a chance to reform energy laws, which could increase private companies' role in energy production.

Although state energy producer Pemex currently has a monopoly, Pena Nieto made reforming energy laws a priority during his presidential campaign, said Jose Luis Uriegas, CEO of Mexico-based chemical producer Grupo Idesa.

Under any reform, Mexico would remain the owner of the nation's hydrocarbons, Uriegas said. However, reforms would create a framework that would allow more private participation, including shared benefits from increased energy production.

This would incentivise foreign players to provide technology and funds to develop hydrocarbon reserves in Mexico, he noted.

"I see him very committed to energy. He will put a lot of political capital into energy reform," Uriegas said.

Such reforms could receive cooperation from Mexico's two major political parties, the Partido Revolucionario Institucional (PRI) and the Partido Accion Nacional (PAN), Uriegas said. "If they work together, they will have enough votes for reform."

READY TO COMPETE

Benedetto Alexanderson said that along with its population dynamics, Mexico has everything in place to be competitive in the global chemical industry.

He expects Mexico will play a bigger role in global trade as evidenced by being invited to be a part of the Trans-Pacific Partnership (TPP) talks in December 2012.

In June, President Barack Obama announced that the US and the eight other countries negotiating the Trans-Pacific Partnership (TPP) Agreement have extended an invitation to Mexico to join the TPP negotiations.


Author: Heather Doyle and Al Greenwood



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