Braskem eyes ethane with Brazil stronger than Mexico
Braskem is considering contrasting ethane outlooks for its operations in Mexico and Brazil. In Brazil, Petrobras and other companies could increase oil production in the country’s offshore pre-salt reserves. If drilled, these oil wells would also produce associated gas, which is rich in ethane and other natural gas liquids (NGLs).
While Braskem relies mostly on naphtha as a feedstock for its crackers in Brazil, it does have crackers that can use gas. One is at its Camacari complex in Bahia state, of which half can be run using ethane. Another cracker in Rio de Janeiro state in Duque de Caxias is ideally placed to use the ethane produced from these new offshore wells.
Doubling the capacity of the Duque de Caxias cracker has been something that Braskem has been considering for years. The cracker has a current ethylene capacity of about 540,000 tonnes/year.
Any expansion project would depend on future oil production and on the midstream infrastructure that would be needed to process the gas, the company said during a recent earnings conference call.
The midstream portion is moving along, if slowly. State energy producer Petrobras recently awarded a contract to complete the construction of a natural gas processing unit at the Complexo Petroquimico do Rio de Janeiro (Comperj) in Itaborai, Rio de Janeiro state.
The consortium that won the contract should begin work on the project in the first half of this year, with operations starting in the second half of 2020.
The unit would the largest of its kind in Brazil, Petrobras said, with a capacity to process 21m cubic metres (mcm)/day.
Braskem executives stressed that any move to expand the Duque de Caxias cracker will depend on both progress on midstream infrastructure and on feedstock supplies. It will make a decision on the project depending on the outlook for each of these items.
Meanwhile, in Mexico, tight ethane supplies are limiting the output of the company’s joint-venture project in Coatzacoalcos. Braskem owns a 75% in Braskem Idesa, which runs a 1.05m tonne/year ethane cracker, 750,000 tonnes/year of high-density PE (HDPE) capacity and 300,000 tonnes/year of low-density PE (LDPE) capacity.
The joint venture’s complex, called Ethylene XXI, had its first full year of operations in 2017, when it produced 923,540 tonnes of PE, versus a nameplate capacity of 1.05m tonnes/year. That comes to a run rate of 88%. Braskem expects the run rate to continue at 85-90% for this year, depending on the availability of ethane, executives said.
“Even though we are not receiving all the feedstock that we had expected at first, the operating rate is pretty good at 88% on average,” said Pedro Teixeira, Braskem chief financial officer. He made his comments during a Q4 earnings conference call
Ethylene XXI receives its ethane under a long-term contract with Mexican state energy-producer Pemex. Braskem receives payments from Pemex if it is unable to fulfil its supply obligations under the contract. The penalty is based on a percentage over ethane prices, so if ethane prices rise, so does the compensation.
Pemex has struggled to supply ethane not just to Ethylene XXI but also to its own crackers, causing its own production of PE to decline because of a lack of feedstock. The company has started importing ethane from the US at a converted terminal in Pajaritos. Depending on the success of the initiative, that may allow Pemex and Braskem Idesa to run their ethane crackers at higher rates.
Braskem also said that Pemex could increase extraction rates at its fractionation system. If successful, that could provide Braskem Idesa and Pemex with another source of ethane.
Mexico accounted for roughly a quarter of Braskem’s total PE production in 2017. The majority of the company’s PE capacity is in Brazil, where the outlook continues to improve as the nation emerges from one of its worst recessions ever.
Fourth-quarter domestic sales of PE reached 455,557 tonnes. That is the largest total for the fourth quarter since at least 2010, the earliest year for company sales figures kept by ICIS.
Domestic polypropylene (PP) sales rose year on year in the fourth quarter, but they were still down from previous Q4 levels. Fourth-quarter domestic sales of polyvinyl chloride (PVC) also recovered from low levels earlier this decade.
Brazil’s construction industry was hit particularly hard by the recession, and its recovery has been slower than other sectors of the economy.
Nonetheless, the sector is showing signs of recovering, as demonstrated by the higher PVC domestic sales figures.
“We are seeing a sustained recovery in demand,” Teixeira said. Brazilian demand for PE, PP and PVC should grow by 4% in the first quarter, he added.
Braskem is seeing strong demand from automobiles, appliances and electronics. Agriculture, which has led the recovery in Brazil, has been especially good.
Construction is still lagging, but it is showing some signs of growth, Teixeira said. This is one of the reasons why demand growth for PVC is slower than the other polymers.
Still, the overall outlook for the Brazilian economy has improved from the deep recession. Economists surveyed by the Central Bank of Brazil expect GDP to grow by 2.84% this year and by 3.00% in 2019.
Additional reporting by Simon West