Bolivia makes 'wise decision' to postpone PP plant – analyst

28 March 2018 23:37 Source:ICIS News

MEDELLIN, Colombia (ICIS)--Bolivian state-run energy producer YPFB’s decision to omit the construction of a $2.2bn propylene and polypropylene (PP) plant from its 2018 spending plans was a “wise decision”, an analyst told ICIS on Wednesday.

The proposed 250,000 tonne/year PP facility, located in the province of Gran Chaco in Bolivia’s southernmost Tarija department, was excluded from this year’s budget while further studies were carried out to analyse new technologies and potential markets, hydrocarbons minister Luis Alberto Sanchez told official state news ABI.

Some experts, however, remain unconvinced of the plant’s viability.

“YPFB took a very wise decision not to go ahead with this project,” Alvaro Rios, Bolivia’s former hydrocarbons minister and partner at consultancy firm Gas Energy Latin America, told ICIS.

According to Rios, declining reserves and production of natural gas feedstock, YPFB’s lack of spending power amid lower gas exports to Brazil and Argentina, and poorly defined markets and commercial strategies to sell PP all count against the construction of the plant, which was originally slated to begin operations in 2021.

The suspension – temporary or otherwise – will be a hard pill to swallow for President Evo Morales’ administration, whose ambitions to turn the Andean nation into a regional petrochemical powerhouse appear to have hit the buffers.

Authorities are also under the gun to explain why YPFB’s Bulo Bulo nitrogen fertilizer plant in central Cochabamba department is offline again, just weeks after a restart and six months after the flagship facility was inaugurated.

The $953m export-oriented plant, which has a capacity to produce 2,100 tonnes/day of urea, was shut down for “preventative and corrective maintenance work”, YPFB president Oscar Barriga told ABI on 8 March.

The closure has prompted an angry response from opposition parties in Bolivia. Democratic Unity senator Oscar Ortiz called the situation “absurd” and questioned whether YPFB can now meet its urea supply agreements with Brazil.

“It’s impossible that a recent inauguration requires so much attention,” Ortiz tweeted. The senator pointed to a number of structural problems that have afflicted operations, including inadequate storage facilities and transport logistics.

Questions also remain over the commercial viability of the plant, despite several fertilizer off-take agreements in place, including a two-year deal with Swiss trader Keytrade to supply up to 335,000 tonnes/year of urea to three states in Brazil.

“The plant has exported 10,000 tonnes since its inauguration, or just four or five days-worth of production out of a total of 180 days in operation,” Rios said. “YPFB must change tack if it wants to recuperate capital and make a profit.”

By Simon West