Price and market trends: Pemex seeks joint venture for ethylene glycol and aromatics

29 November 2013 09:35 Source:ICIS Chemical Business

Mexico’s state owned energy company Pemex is exploring a joint venture (JV) to build ethylene oxide (EO)/ethylene glycol (EG) and aromatics facilities, along with expanding cracker capacity in Mexico, a senior executive said.

“We are looking for a local Mexico partner to build EO/EG and aromatics plants. Since we don’t produce enough ethylene now for EO/EG, that implies expanding our crackers,” said Carlos Pani, senior vice president of petrochemical sales and marketing at Pemex.

 

 Carlos Pani says Pemex seeks more partnerships

Pani spoke to ICIS at the 33rd annual Latin American Petrochemical Association (APLA) meeting in Cartagena, Colombia.

Pemex has two ethane crackers in Cangrejera and Morelos, Mexico, each with a capacity of 600,000 tonnes/year.

“We can expand our existing crackers to get another 200,000-300,000 tonnes/year of ethylene,” said Pani. The entire project, including the construction of EO/EG and aromatics facilities, could take two to three years to complete, he said.

In September 2013, Pemex completed its first ever joint venture – a partnership with Mexichem to double vinyl chloride monomer (VCM) production to 400,000 tonnes/year by 2015.

“That JV was ground breaking and opens the door for additional ones. We learned a lot in the process, and you can expect more form Pemex,” said Pani.

MEXICO ENERGY REFORM
The proposed energy reforms in Mexico that would also include Pemex operating more as an independent company with competition rather than as a state monopoly will also spur additional ventures, he noted.

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, said Pani. 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, and these units would change significantly once they are exposed to competition, Pani 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.

This deficit will persist even after the Braskem Idesa joint venture completes the Ethylene XXI integrated PE complex. It will produce 1.05m tonnes/year of PE from ethylene derived from ethane.

Moreover, once Ethylene XXI starts production, Pemex will not have enough ethane for another new cracker just yet.

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.

By Joseph Chang