Recently in Latin America Category

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 increase US ethylene capacity by about 32% 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 with their ethane counterparts - a fact acknowleged by Isabel Figueiredo, director of Brazil-based petrochemical producer Braskem, who spoke at the 6th EBDQUIM conference in Praia do Forte, Brazil, hosted by Brazilian association of chemical and petrochemical distributors Associquim 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 (PE) units, is expected to be complete by mid-2015.

Its next big undertaking will be Comperj - the long-anticipated project with state oil firm Petrobras, which is expected to be the largest ever in Latin America. Braskem will define the scope of Comperj in 2012.

The ultimate success of Comperj will be tied to Petrobras's development of its giant offshore oil and gas reserves, which lie underneath a massive layer of salt. This could contain up to 10bn barrels of oil equivalent.

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

Meanwhile, Argentina will start to 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 bbl.

YPF, majority-owned by Spain's Repsol, is under heavy government pressure to develop its oil and gas reserves, as falling production has led to greater imports. Natural gas shortages in 2010 resulting from a cold winter led to severely curtailed production at petrochemical operations in Bahia Blanca. In neighboring Chile, where Methanex has four methanol units, the Canada-based producer is relocating a unit to Louisiana, US, because a lack of natural gas supply has meant only one plant is in operation.

However, 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.

Sure - love makes the world go 'round as they say, but really it's energy. And with an increasing population as well as industrialization, the world undoubtedly needs more of it.

Clearly there is no one answer to the billion-dollar energy question. Encouragingly, we are exploring a multitude of new methods to produce and transport energy - and many of them cleaner and greener.

Some are high tech and futuristic, like the international consortium constructing the world's largest nuclear fusion reactor in southern France at a cost of $10bn.

But other sources have been around for millennia, and just need to be better exploited.

The US is tapping into vast quantities of onshore natural gas reserves in shale formations through use of new technologies. The country now has an estimated 100 years worth of supply versus the traditional eight years.

And Brazil is making greater use of its fields of sugarcane. It already is supplying its growing domestic market with sugarcane ethanol for flex-fuel vehicles. New tax policies will make flex-fuel cars the standard versus gasoline-only cars.

The next step will be to use a by-product in the sugar production process called bagasse to generate electricity on a greater scale.

Even though the world's largest hydrocarbon discoveries in recent years have been made off the coast of Brazil, it is still developing alternatives.

A good diversity of energy sources is key. Relying too heavily on one source - whatever it is - has its pitfalls.

Photo credit: sodahead.com

With all the world's attention focused on Asia and its booming economic growth driven by China and India, Latin America tends to get overlooked. But that would be a big mistake, as the region is making significant strides towards becoming an industrial powerhouse.

The Latin American chemical industry has taken its lumps in the global recession, but will emerge even stronger if the right investment opportunities are pursued.

The region is rich in natural resources, from oil and gas, iron ore and lithium to an agricultural bounty that can provide the basis for a burgeoning biofuels industry. Relative political stability over the years has provided a firm platform for economic growth.

This opportunity cannot be squandered - the time to invest is now! On the chemical front, Brazil is leading the way with several large petrochemical expansions by state-operated energy and chemical giant Petrobras, and chemical firms Braskem and Quattor (who are also studying a strategic alliance or merger).

Mexico, which is hosting the Latin American Petrochemical and Chemical Association's (APLA) 29th annual meeting in its capital from November 7-10, has the opportunity to finally get a major petrochemical project off the ground with its Ethylene XXI venture.

We eagerly await news from the meeting. Look for the November 2 issue of ICIS Chemical Business featuring Latin America.

Image: 3FL

   BY SPECIAL GUEST COLUMNIST ARTURO GARCIA

Is there a real future for Mexico's petrochemical industry? We still have no answer, or at least we keep trying to justify that "with no answer" we still have an opportunity. But when will this opportunity materialize?

Because of its great economic impact downstream, we need to battle the enemy before us - that is, the lack of political will. There is a critical decision at hand to allow private companies to access ethane feedstock at a competitive price in a long-term supply contract.

It is one that is under President Calderon's decision-making faculties, and must be made with a long-term view that appreciates the enormous benefits that arise in Mexico from an economic standpoint.

The Phoenix Project, Mexico's planned multibillion-dollar joint venture cracker and derivatives complex, failed even with the full support of former President Vicente Fox, just because there was an alternative value for ethane as a fuel.

The issue of whether to sell ethane at a competitive price in a long-term supply contract to partners in the Phoenix project versus selling it as a fuel became a dogmatic struggle between economists, entrepreneurs, and politicians.

Unfortunately, short term vision and the lack of recognition of the great benefits that projects like this would bring to Mexican economy, prevailed.

Today we again have an opportunity, as low natural gas prices, at least in the3 medium-term, provide a great deal of competitiveness.

Yes, NAFTA region and its ethane-based crackers, are becoming competitive again - even enough to consider expansions or new crackers such as the one being planned in Mexico.

Mexico's Ethylene XXI Project aims to build a 1m tonne/year grassroots cracker wholly-owned by private companies. Hopefully this time, our government will make the right decision to promote projects like this, finally recognizing that we have the obligation to create value through petrochemicals for the benefit of Mexican citizens.

Arturo Garcia (pictured above), based in Mexico City, is CEO of Mexican plastics distributor Resinas TB and former executive director of Mexico's Phoenix project.

By Anna Jagger/London

Brazil's chemical sector is better positioned than most to weather the financial slump. Producers were hit badly by the collapse in global demand at the end of last year, but they have reason to be optimistic about the year ahead. There are signs that domestic chemical demand is picking up, helped by government investment in infrastructure projects and a growing middle class.

Following a contraction this year, the Brazilian economy is expected to rebound in 2010. Some Brazilian economists are predicting GDP growth of 4.5%.

The country, which is the world's 10th-largest economy, is already self-sufficient in oil, and new hydrocarbon discoveries should improve the availability of petrochemical feedstocks in the long term. The discoveries will complement already available feedstock from the Campos Basin, which will feed a major new refinery and petrochemical complex in Rio de Janeiro (see page 18).

Another reason for optimism is the untangling of the Brazilian chemical industry's complicated ownership structure to create two large players: Braskem and Quattor. Braskem CEO Bernardo Gradin is cautious about predicting a recovery, but says the company is progressing on new projects in Latin America, and will explore opportunities in the US. A US production base would help Braskem become a truly global player.

A US production base would help Braskem become a truly global player.

CHINA'S $10bn deal with Brazil to lock up significant oil supplies from its energy firm and join in exploration, refining and petrochemical ventures, heralds a new age of cooperation between the two countries.

Under a 10-year deal, China Development Bank is giving a $10bn credit line to Brazilian energy giant Petrobras in return for the company sending an average of 150,000 bbls/day of oil to China in 2009 and 200,000 bbls/day from 2010. Petrobras needs the money to develop its huge reserves and China needs the oil.

China's energy major Sinopec and Petrobras are now discussing joint projects in refining, petrochemicals as well as exploration, said Petrobras CEO Jose Sergio Gabrielli de Azevedo at a press conference at the New York Stock Exchange.

The deals are part of a broader economic partnership between Brazil and China, which plan to put forth a joint action plan for 2010-2014. In April, China overtook the US as Brazil's largest trading partner for the first time.

But why not view this deal as a model for the US and other oil importing countries to secure supplies from abroad? Petrobras says it's financing needs are now all taken care of, with $30bn in funds raised this year, but there are always other opportunities.

China is aggressively locking up oil and other natural resources through deals and acquisitions. It's a race out there to secure increasingly limited resources.

With oil output in the next several years projected to decline sharply in Mexico, the second-largest oil exporter to the US at around 1.2m bbls/day, the US must seek additional supplies.

While the US is ploughing billions of dollars to develop its own energy resources, direct government lending to help develop much needed foreign oil supplies might not be a bad investment as well.

(Photo credit: Xinhua/Rao Aimin)