Mexico’s Pemex turnaround key to unlock $50 billion chemicals investments – ANIQ

SAO PAULO (ICIS)–Mexico’s chemicals sector is ready to potentially invest $50 billion in the next decade if key challenges are addressed, including performance at state-owned energy major Pemex, according to the president of trade group ANIQ.

Jose Carlos Pons, who is also the CFO of Mexican chemicals producer Alpek, said ANIQ is in constant contact with the Mexican government about potential projects private companies and Pemex could jointly implement, some of them related Pemex assets in petrochemicals which are idled or running at low capacities.

Pons, who was appointed ANIQ’s president in May, said that the $50 billion in investments would mean the chemicals industry could double its contribution to GDP from 2% to 4.5%.

He said ANIQ is in contact with the ministries of energy and economy (Secretaria de Energia and Secretaria de Economia, respectively) about these plans.

The two ministries, as well as Pemex, had not responded to a request for comment at the time of writing.

IT IS (ALMOST) ALL ABOUT PEMEX
Pemex, which is the largest and key supplier of raw materials to the Mexican chemicals industry, has for years suffered performance problems, with output dwindling below 2 million barrels/day, despite targets to surpass that threshold, and having become the most indebted oil major with obligations of around $100 billion.

However, ANIQ puts many hopes in the new administration under Claudia Sheinbaum and in what it sees as an honest intention to turn around Pemex, adding that the trade group wants to go “hand in hand” with the government to spur the investments in petrochemicals.

The cabinet has announced plans to cut costs at the major as well as petrochemicals and fertilizers expansions at the company. However, potential and ambitious investment plans – both from Pemex itself and private companies – hinge on several critical factors.

“If we were able to turn Pemex around, by improving its supply of key raw materials; if we were able to work on the energy side and achieve competitiveness; if we were able to create the infrastructure so that we wouldn’t depend so much on imports; and if we simplified our country’s administration, then there could undoubtedly be that potential [of $50 billion chemicals investments],” said Pons.

Out of those $50 billion, Pons said that around two-thirds would go primarily to maintenance investments to improve Pemex’s petrochemicals operational capacity.

“Today, we have a great opportunity for Pemex to operate its plants at greater capacity, and the way to achieve that goal would be to give the plants operational reliability. Ensuring that the different parts of each of the plants have operational reliability will ultimately increase the output of those plants,” she said.

“Pemex has now an interesting opportunity. Throughout all the areas where it operates, without a doubt, this administration and the previous one have dedicated resources to turning it around. It’s very important to us that they’re doing this.”

Efforts to turn around Pemex, however, have so far failed. The previous administration by Andres Manuel Lopez Obrador started its tenure with a target for output to surpass 2 million barrels/day target, which it finally ditched.

Some analysts have said Pemex’s woes are too deep and make the company’s survival very difficult. Others, however, think the major is ‘too big to fail’, and therefore will continue to be bailed out by the Treasury as it has been the case for years.

“Pemex is very important to us, so we don’t even want to consider a Pemex that fails. Today, it provides us with gas, with many raw materials. The situation is complex, and the fact that it is among the priorities reflects the government’s intentions. But these huge titans take time, but with the right investments and decisions [it can happen],” said Pons.

“That’s why we want to work hand in hand with the government. The project is so large that we all need to get involved. What we want is to tell them and indicate what we think the priorities are and where we want to help them.”

Pons said ANIQ has established working groups with both the Ministry of Energy and Ministry of Economy to advance these objectives, with regular conversations.

“We want to understand in greater detail what the government’s expectations are and under what conditions they are expecting them to happen,” said Pons.

“Without a doubt, for the private sector to invest, there must be a certain economic logic, whether it’s guaranteed supply contracts with priority or a preferential price, so that the investment is paid for.”

There would also be other, country-wide challenges to be addressed, however. Pons mentioned for the chemicals investment plans to succeed there would be a need to improve other key energy supplies such as electricity, water and natural gas. And yet another added challenge for Mexico: infrastructure.

Pons mentioned ANIQ is optimistic about the government’s Plan Mexico, ambitious measures touching nearly all aspects of the economy with the target of putting Mexico among the world’s 10 largest economies. It is now considered to be placed between the 12th and 15th world economic ranking – depending on source and its methodology to calculate GDP.

FRIENDLY LOBBYING
Pons was pressed about the rather friendly lobbing ANIQ is currently exercising when it comes to the policies of Sheinbaum, who has implemented reforms ‘Corporate Mexico’ is not happy about, such as a judicial reform which has raised alarm bells about the damage it could cause to the state of law, therefore to corporate law.

But he would not expand much about those issues, because he said ANIQ is right now focused on helping bring about the abovementioned investment plans, and the trade group has opted for that tone rather the festy lobbying tone other trade groups can use.

“What we want most is to work together with the government. What I truly want in my tenure as president is very important to me: for the government to understand that we must work together and that we believe Plan Mexico is truly something important,” said Pons.

“So, rather than creating an enemy in the government, what I want to work on is to work hand in hand with them and for them to understand that this won’t work if we don’t work together. We’ll do it when necessary [a more robust lobbying], but right now what I want most is to reach out to the government, for them to understand that we’re going to work together.”

ICIS will publish on Monday (9 June) the second part of this interview, with ANIQ president’s take on the US shift in trade policy and the role of China in the global economy

Front page picture: Facilities operated by Mexico’s polyethylene (PE) producer Braskem Idesa 
Source: ICIS

Interview article by Jonathan Lopez