Latin American projects delayed by downturn

Praying for good times

01 December 2008 00:00  [Source: ICB]

SOME MAJOR petrochemical projects have been proposed for Latin America, but negotiations are being delayed as a result of the global economic crisis, according to delegates at the Latin American Petrochemical Association (APLA) meeting in Rio de Janeiro, Brazil, last month.

Mexico's state-owned energy group Pemex intends to offer ethane gas for a petrochemical complex, while several projects are planned for Venezuela and a major refinery and petrochemical project is being developed in Rio de Janeiro state. Investments are also proposed for Colombia and Peru.

Concerns about falling demand and access to financing are resulting in companies reviewing the timescales for their projects. "Projects could slide a year or two," said Jorge Buhler, director of US-based Polyolefins Consulting.

Export-oriented projects, such as the proposed Venezuelan investments, could become harder to justify in the current economic climate, observed Buhler. "But if your market is mainly local, you have a competitive advantage because you are already there."

The Comperj project in Rio de Janeiro state, being developed by energy group Petrobras and fuel distributor Grupo Ultra, both Brazilian, will target the local market. The scheduled start-up date is 2013, but this is likely to slip.

Mexico, with its large petrochemicals deficit, desperately needs a new petrochemical project. "The petrochemicals deficit is getting bigger and bigger," remarked Buhler. "The market is not the problem - the problem is getting the feedstock."

INTERESTED PARTIES

Various companies have expressed an interest in bidding for an ethane supply contract with Pemex, but commentators said talks are on hold until mid-2009. Some questioned whether Pemex would be able to kick-start a petrochemical project following the failure of its proposed Phoenix initiative.

The new project, named Ethylene XXI, will be 100% privately owned, and therefore completely different to the Phoenix project, observed Luis Rafael Montanaro Sanchez, strategic planning and business development manager at Pemex Petroquimica, Pemex's petrochemicals arm. He insisted that negotiations regarding the ethane supply contract were ongoing. "Discussions are taking place," he said. "The project is alive."

The Ethylene XXI project's feasibility will depend on the price of ethane supplied by Pemex, which historically has been reluctant to supply petrochemicals feedstock at a competitive price. "If a floor is set, and if that floor is too high, no-one will be willing to invest because they won't be competitive in their end-markets," remarked Raul Arias, a consultant with US-based consultancy Nexant.

Mexican chemical majors Idesa, Mexichem and Alpek plan to submit a joint bid for the ethane supply contract, and international players are understood to be interested.

In Jose, Venezuela, state-owned producer Pequiven and Brazil's Braskem are planning two projects. These investments face possible delays as a result of the global financial crisis and falling oil prices, said Freddy Salas, a former planning and development manager at Pequiven, who will retire in March.

Pequiven, which is also planning an ambitious project in Paraguana, Venezuela, plans to review its investment plan at the end of the year, Salas said. "The number of projects that are delayed will depend on the budget plan," he added, noting that Pequiven's budget is linked to the evolution of oil prices.

Pequiven and Braskem had planned to start up a polypropylene (PP) plant in 2011 and an ethylene and polyethylene (PE) complex in Jose at the end of 2012 or the beginning of 2013. INEOS and Basell have been preselected to supply PE technologies, Salas said. And Basell has been selected to supply its Spheripol technology for the PP unit.

As in Mexico, the proposed projects in Colombia and Peru are at the conceptual stage. Colombian oil company Ecopetrol plans to raise its PE capacity from 50,000 tonnes/year to 550,000 tonnes/year, while PP capacity could rise from 400,000 tonnes/year to 900,000 tonnes/year, according to Mario Hernan Cardozo, director for mergers and acquisitions.

The company is considering building a 200,000 tonne/year ethane cracker in the Bogota/Cusiana region, based on natural gas from the Cusiana fields, in addition to a 700,000 tonne/year naphtha cracker in Barrancabermeja, based on naphtha from the refinery, he said.

In Peru, gas for an olefins complex would be supplied from the Camisea gas fields. While the timescales for projects and potential projects are likely to be set back, in general, delegates did not believe projects would be cancelled. Latin Americans are used to crises, so are well placed to weather the storm, observed Arias. It's not a question of if these projects take place, but when, Bauman said. "We don't see anything canceled."

 Listen to radio interviews from the APLA meeting in Rio de Janeiro

ICIS Copyright © Reed Business Information 2009

Author: Anna Jagger
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