Price and market trends: Mexichem VCM joint venture with Pemex is not dead

14 December 2012 10:03  [Source: ICB]

Mexichem's planned vinyl chloride monomer (VCM) joint venture (JV) with Mexico's state-owned oil and gas company Pemex could still go through, the chairman of Mexichem said.

"We are optimistic about the possibilities with Pemex but we are not desperate," said Juan Pablo del Valle, chairman of Mexichem, on the sidelines of the Chemical Marketing & Economics Group meeting on 6 December. "Our priorities will only change once the [Pemex] board approves the JV. But it may come to a point in time when the window closes and a board approval may come too late."

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Del Valle also noted that Pemex's assets in Pajaritos, ­Mexico, which would be part of the venture, "are in very bad condition".

A key factor in the chairman's optimism is that Mexico's new president Enrique Pena Nieto took office on 1 December, and has appointed new executives at Pemex.

VENTURE THREAT

On 23 November, Mexichem said it was scrapping plans to complete the joint venture with Pemex because of continued ­delays from Pemex in approving the deal.

"We just wanted to push to make things happen. The deal is not dead," said del Valle.

The proposed Mexichem/Pemex 60:40 JV has been waiting for Pemex board backing since it secured antitrust approval in October 2012. It includes a 230,000 tonne/year VCM plant, which would be expanded to 400,000 tonnes by 2015, a 200,000 tonne/year ethane cracker and a chlor-alkali plant in Pajaritos, Mexico.

Pemex's crackers in Morelos and Cangrejera were expected to supply additional ethylene.

On 27 November, Pemex insisted that the VCM JV was still possible and that a vote would take place in the next administration.

In August 2012, Mexichem announced a memorandum of understanding (MoU) with US-based Occidental Chemical (OxyChem) to build a 500,000 tonne/year joint venture cracker at Ingleside, Texas, US.

Substantially all the ethylene would be used by OxyChem at Ingleside to produce around 1m tonnes/year of VCM to be shipped to Mexichem's polyvinyl chloride (PVC) plants in Mexico and Colombia under a long-term supply agreement.

OxyChem and Mexichem are aiming to make a final decision on the cracker in the second quarter of 2013 following the completion of a feasibility study and basic engineering. "Investing in the US complements our strength in Mexico," said del Valle. "Shale gas will also transform our company and we'll be in the US for a long time."

  • Additional reporting by Simon West

By: Joseph Chang
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