Braskem may drop Comperj cracker, double Rio unit instead

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Focus article by Joseph Chang

NEW YORK (ICIS)–Brazil-based petrochemical and polymers company Braskem is set to drop plans to build the Comperj petrochemical complex in Rio de Janeiro state and is instead exploring a doubling of capacity at its existing gas-based cracker there to over 1m tonnes/year, a source familiar with the situation said on Tuesday.

“The idea is to double capacity at the Rio cracker. Braskem is dropping Comperj and studying this option instead,” said the source.

“All the infrastructure is there. When the Rio Polimeros project was launched five years ago, it was built to be able to double the current capacity,” he added.

Capacity at the cracker complex, located at Duque de Caxias in Rio de Janeiro state, is around 540,000 tonnes/year of ethylene and polyethylene (PE). However, the cracker is running at less than full capacity because of a lack of ethane/propane feedstock, said the source.

Braskem’s planned massive Comperj petrochemical project at Itaborai in Rio de Janeiro state, which would include a worldscale gas cracker, had been on hold for years, as Braskem was unable to reach a supply deal on ethane/propane feedstock with state-operated oil and gas company Petrobras.

At the Latin American Petrochemical Association (APLA) meeting in November 2014 in Rio de Janeiro, Braskem executive vice president Luciano Guidolin said the company was analysing US ethane/propane imports for the gas cracker, as capacity utilisation was around 80% at the time and could be higher with more feedstock.

Braskem’s Rio cracker, formerly called Rio Polimeros, is the only gas-based cracker out of four in Brazil with the others in Camacari, Paulinia and Triunfo being naphtha-based. All four are owned by Braskem.

Timing of the expansion project is uncertain, as Braskem has yet to agree on feedstock. “Braskem would not expand Rio Polimeros without a guarantee on feedstock from Petrobras,” the source said.

Consultants at Brazil-based ChemVision agree that an expansion of the existing Rio cracker is far more feasible than the construction of a new Comperj cracker complex.

“It is much easier to increase the capacity at Rio Polimeros than build a project such as Comperj,” said Manuel Quintela, director at Brazil-based consultancy ChemVision.

“All the infrastructure is there, and it was designed to be expanded,” he added.

Comperj was planned to have a petrochemical portion developed by Braskem and a refinery portion developed by Petrobras

Petrobras is working on the first phase of a new refinery. That refinery could have a processing capacity of 230,000 bbl/day. A second phase at the complex should bring Comperj’s processing capacity to 330,000 bbl/day.

Despite an economic slowdown in Brazil, uncertainty from low oil prices and the widening corruption scandal involving Petrobras, there is an opportunity in the country to expand chemical production to reduce the reliance on imports, said Carlos Lopes, director at ChemVision.

Chemical segments that are growing quickly and where Brazil can “aggregate value” include pesticides; animal food additives; cosmetics; butadiene, isoprene and derivatives; surfactants; aroma, flavours and fragrances; and oilfield chemicals, he noted.

“Brazil is an exporter of commodity grade chemicals but an importer of specialties. Imports amount to $3 for every $1 of exports,” said Lopes.

In 2014, Brazil’s trade deficit in chemicals was $31.6bn, with the largest deficits arising from trade with Europe at $10.9bn and the NAFTA countries (US, Canada, Mexico) at $9.5bn.

Brazil must step up investment in chemical production, particularly of specialty chemicals. However, it also needs large-scale petrochemical projects to secure feedstocks, Lopes pointed out.

Even for petrochemical feedstocks, Brazil relies on imports. Around 60% of naphtha needs for petrochemical production is imported, noted Quintela.

Investment in Brazil’s chemical sector peaked in 2012 at $5.9bn, and has since trickled off to $2.1bn in 2013 and $1.7bn in 2014. ChemVision estimates that investment in 2015 will be just $900m.

“Unless we can invest, imports will continue to increase – this is a weakness for Brazil. The country must attract investment and innovation through new technology,” said Quintela.

Longer term, after 2020, development of Brazil’s pre-salt offshore field should increase the availability of ethane feedstock and improve competitiveness, according to the consultancy.

However, there is great uncertainty on the timing of development in the near to medium term, as the sharp decline in crude prices has caused oil companies to slash capital investment plans.

Petrobras has not made an official announcement on updated spending plans but there is concern that investment could be curtailed, delaying the availability of hydrocarbons for petrochemical feedstock.

Petrobras had a stated goal of producing 5.2m bbl/day of oil and equivalents by 2020, and capital investment of $221bn from 2014-2018. In 2013, the company produced 2.3m bbl/day of oil and equivalents.

On top of the uncertainty caused by the fall in crude oil prices, Petrobras is mired in a wide-ranging corruption scandal allegedly involving overspending on construction projects and kickbacks to government officials.

In early February, Petrobras CEO Maria das Gracas Silva Foster and five senior executives were replaced by the board of directors.

And there are other hurdles for investment in Brazil’s chemical sector.

“Brazil’s development is challenged by complex and high taxes, underdeveloped logistics infrastructure and relatively high feedstock costs,” said Lopes.

Meanwhile, demand for most polymers is expected to grow at around 3-4%/year through 2020 with higher growth rates of nearly 6% or higher for polyethylene terephthalate (PET), polypropylene (PP), high density polyethylene (HDPE) and linear low density PE (LLDPE), according to ChemVision.

ChemVision entered into a strategic alliance with consultancy Nexant in November 2014.