18 November 2013 19:25 [Source: ICIS news]
CARTAGENA, Colombia (ICIS)--The energy reforms proposed by Mexican president Enrique Pena Nieto will open up many segments of Pemex to competition, an executive for the company said on Monday.
By the end of this year, Mexico’s constitution will likely be amended, opening up the nation’s energy sector to outside companies and potentially increasing production. Mexico’s new president, Enrique Peña Nieto, introduced the proposed reforms earlier this year, in the form of changes to the nation’s constitution.
If Pena Nieto’s reforms pass, then the congress would draft secondary laws that would determine who could participate in Mexico’s energy sector and under what terms.
The reforms would allow outside companies to participate in oil, gas and natural gas liquids (NGLs) production as well as oil refining in Mexico. Right now, production is limited to the state energy producer, Pemex.
This would expose several units of Pemex to competition, said Carlos Pani, senior vice president of sales and market for the petrochemicals division of Pemex. Pani made his comments on the sidelines of the annual meeting of the Latin American Petrochemical Association.
These Pemex units would change significantly once they are exposed to competition, he said.
Unlike the other segments, Pemex's petrochemical unit already competes against other producers in Mexico.
Nonetheless, the reforms would also affect Mexico's overall petrochemical industry.
Currently, Mexico has a deficit in several petrochemicals, including polyethylene (PE).
Pani estimates that the country imports about 1.5m tonnes/year of all grades of PE, and the domestic market will likely continue to grow by 3-4%/year.
Moreover, once Ethylene XXI starts production, it will not have enough ethane for a new cracker. The country would have only enough ethane to increase overall ethylene capacity by 200,000-300,000 tonnes/year at its existing crackers.
The energy reforms could increase production of ethane, which Mexico could then use to produce ethylene and, subsequently, PE and other derivatives, Pani said. Already, Pemex's crackers use ethane as a feedstock, giving them a potential cost advantage versus naphtha-based plants.
Mexico will not likely see the effects of these and other reforms until 2015, Pani said.
Speaking about the reforms in general, Pani said much of the scope of the reforms would be determined by the secondary laws. "You can modify the constitution, but if the secondary legislation does not go all the way, you can block the spirit of the reforms," he said.
Unlike the amendments to the constitution, these secondary laws do not require a two-thirds majority to pass. Instead, they require a simple majority.
The APLA conference ends on Tuesday.
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