Brazil’s Braskem Rio cracker expansion dependent on availability of domestic NGLs – CFO

SAO PAULO (ICIS)–Braskem could consider expanding its Duque de Caxias, Rio de Janeiro, cracker if more natural gas liquids (NGLs) from pre-salt reserves become available, the CFO at the Brazilian petrochemicals major said on Thursday.

Pedro Freitas said Braskem remains in “constant dialogue” with players in the pre-salt natural gas and crude oil industry and is well-positioned to take advantage of more NGLs once they are available.

However, he added: “We don’t see that [expansion at Duque de Caxias] happening in the short term.”

Freitas was speaking to reporters and financial analysts after Braskem said earlier on Thursday it had posted a fourth-quarter net loss of $326m on the back of poorer spreads for many of the products it produces, especially those for polyethylene (PE) and polypropylene (PP).

Following the results publication, the company’s stock was down more than 4% to Brazilian reais (R) 16.77/share ($3.18/share) by 13:00 local time on Thursday.

“We would be interested [in the expansion] if there are more NGLs available from pre-salt reserves [as] we would be interested in having access to those volumes. The most competitive investment in Brazil today would be expanding our cracker in Rio,” said Freitas.

“That would be the best alternative for the country about where it allocated additional feedstocks if they become available. We keep tracking pre-salt activity and are in constant dialogue with players in the industry to be positioned [to have access to those feedstocks].”

Braskem has been mulling an expansion at Duque de Caxias for years; it has hinted that it could expand its production capacities by as much as 50%.

Currently, Braskem produces ethylene, high-density polyethylene (HDPE), linear low-density polyethylene (LLDPE), propylene and PP at the facility.

Duque de Caxias	Capacity
Ethylene	520,000
HDPE	270,000
LLDPE	270,000
Propylene	75,000
PP	310,000
Source: ICIS

Ethane is one of those NGLs Braskem could use to produce ethylene and then polymers. Pre-salt layer reserves are found in the Atlantic’s African and Brazilian coasts, and pre-salt oil reserves are thought to be a significant fraction of the world’s oil reserves.

Brazil’s state-owned energy major Petrobras is building a pipeline called Rota 3 from its pre-salt wells in the Atlantic to its site in Itaborai in Rio de Janeiro, where it is building a gas processing plant, although the project has been marred by several issues.

Once that plant is completed, Petrobras will be producing NGLs which could provide Braskem with the additional feedstock it needs to expand Duque de Caxias.

According to Brazilian oil and gas company Petrobras, the oil and natural gas reserves lie below an approximately 2,000-metre-thick layer of salt, which in turn is beneath more than 2,000 metres of post-salt sediments in places, which in turn is under water depths between 2,000 and 3,000 metres in the south Atlantic.

($1 = R5.27)

Additional reporting by Al Greenwood and Yashas Mudumbai