Mexico’s Braskem Idesa to build ethane terminal under Pemex deal

HOUSTON (ICIS)–Braskem Idesa plans to build an ethane import terminal in Mexico under an agreement it reached with Pemex, the joint venture said on Tuesday.

With an investment worth $400m, Braskem Idesa will build a world-scale ethane terminal in Laguna de Pajaritos in Coatzacoalcos in Veracruz state, the joint venture said. The project will be in the CIIT – Interoceanic Corridor of the Tehuantepec isthmus.

Braskem Idesa did not specify the capacity of the terminal or whether Pemex will contribute any money towards the project. The joint venture did say that the project will be part of an investment plan announced by the federal government, which calls for development in Mexico’s energy sector and in the southeastern part of the country.

Braskem Idesa, Pemex, the CIIT and the Port Administration of Coatzacoalcos have signed an agreement to work together.

Braskem, the majority owner of Braskem Idesa, said the terminal is scheduled to start in the second half of 2024. It will allow Braskem Idesa to run its polyethylene (PE) operations at full capacity.

Until the terminal starts operations, Pemex has agreed to supply Braskem Idesa with a minimum of 30,000 bbl/day of ethane under the amended supply agreement, Braskem said. That minimum commitment could be extended to February 2025 or later if the terminal has any delays in obtaining licenses.

In the past, Pemex has provided Braskem Idesa with 30,000-35,000 bbl/day of ethane.

The amendment also grants Braskem Idesa the right to buy any ethane that Pemex has available and that it has not consumed for its own purposes until 2045, Braskem said. Braskem Idesa will buy the ethane at international benchmark prices.

The amendment and terminal agreement still need approval from the companies’ boards of directors and Braskem Idesa’s creditors.

Pemex did not immediately respond to a request for comment.

Since Braskem Idesa started PE production at the Ethylene XXI complex, Pemex has struggled to fulfil its obligations under its ethane supply agreement. As a result, Pemex has racked up tens of millions of dollars’ worth of penalties because of its failure to honour its supply agreement with Braskem Idesa.

Over the years, its ethane supplies have fallen with Mexico’s chronic decline in oil production. The nation’s surplus of ethane has turned into a deficit, and Pemex and Braskem Idesa now rely on imports to partially offset the shortage of domestic supplies of ethane.

Those imports are still insufficient to allow Braskem Idesa or Pemex to run their ethane crackers at full capacity.

Braskem Idesa is undertaking another project that will increase its existing ethane imports to 26,000 bbl/day from 20,000 bbl/day. The joint venture should complete that project in the third quarter.

This project should allow Braskem Idesa to run at 80-85% of its capacity once it is supplemented with the 30,000-35,000 bbl/day of ethane that Pemex provides the joint venture.

For Pemex, the shortage has had a knock-on effect on its ethylene derivatives because all of the country’s crackers rely on ethane as a feedstock.

The existing ethane agreement had attracted the ire of Mexico’s president, Andres Manuel Lopez Obrador (AMLO), who alleged that it obligates Pemex to sell ethane at a steep discount.

He has repeatedly called for the cancellation of the ethane contract. Braskem has rigorously defended the contract.

Braskem Idesa is a joint venture made up of Braskem (75%) and Mexican chemical producer Grupo Idesa (25%). Its complex in Coatzacoalcos makes ethylene and PE.

Thumbnail image shows Ethylene XXI. Image by Braskem Idesa