Latin America on the Rebound

Latin America may not be the most prolific region in the world for the construction of new petrochemical complexes--that title would easily go to the hydrocarbon-rich Middle East. But Latin America's enthusiasm for such projects is without equal.

The region has recently seen written commitments for important petrochemical complexes long talked about in Mexico and Venezuela. And many of the 700 delegates at the Asociación Petroquímica y Química Latinoamericana (APLA) annual meeting, held earlier this month in Buenos Aires, wondered if these commitments signal a new atmosphere more favorable to big projects than in the past.

Rafael A. Bielsa, Argentina's minister of foreign affairs, opened the meeting with a talk lauding Argentina's economic turnaround. After a four-year recession, the country experienced 8.7% growth in gross domestic product in 2003 and is projected to rack up 8% growth again this year.

Bielsa stressed integration among Latin American countries and boasted that, under the leadership of President Néstor C. Kirchner, Argentina is improving economic ties with its neighbors. "The Kirchner government perceives regional integration as an advantage in the global marketplace," he said. Such a strategy, he added, has benefits for Argentina's petrochemical industry, such as improving natural gas networks between Argentina and Bolivia to help alleviate Argentina's gas shortage.

But for the most part, the focus of the conference was on petrochemical projects. Arturo García, director of the Phoenix Project at Mexican state oil company Pemex, detailed that ethylene complex, which received definitive commitments last month from partners Nova Chemicals and the private Mexican firms Grupo Idesa and Indelpro.

García said that, after many years of trying to reform the Mexican chemical industry through failed privatization plans and proposed projects that have gone nowhere, the joint venture, in which Pemex will have at most a 49% stake, is "a turning point for the industry."

The project will cost $1.9 billion and will have annual capacity for 1.2 million metric tons of ethylene and 600,000 metric tons of propylene plus derivative polypropylene and polyethylene units.

Pemex and the partners have details such as feedstock costs to work out before final agreements are inked next spring. In addition, García told the APLA audience, Pemex is "analyzing whether it makes sense to produce other ethylene and propylene derivatives to produce the largest number of products in which Mexico has a deficit."

Pemex plans a second phase of the Phoenix Project to produce aromatics. The unit, for which the company hopes to find partners by the end of 2006, would have about 800,000 metric tons of annual capacity for aromatics such as benzene, toluene, and xylene, as well as 250,000 metric tons of ethylene and 400,000 metric tons of propylene. Downstream products, García said, could include styrene.

In Brazil, the Rio Polímeros ethylene and polyethylene project among Petrobras, Unipar, Suzano, and a national development bank is 90% complete. The complex was supposed to be finished this year, but it has been delayed until about April 2005, industry sources say, because of a three-month construction workers' strike.

Longer term, Paulo R. Costa, director of supply for Brazilian national oil company Petrobras, said his company is focusing on a study of an ethylene cracker on the Bolivian border that would use ethane from Bolivia. The project, he said, would cost about $1.4 billion and produce 525,000 metric tons of ethylene per year.

Argentina, in recent years, has seen the completion of a cracker at the PBB Polisur polyethylene joint venture between Dow Chemical and Repsol YPF. The country may have enough feedstock for new petrochemical capacity, according to Carlos Octtinger, president of the raw material commission at the Argentine Petrochemical Institute. Around the country, he said, some 1.4 million metric tons of ethylene and 573,000 metric tons of propylene could be made from available natural gas liquids.

EVEN PERU, only a minor petrochemical supplier today, may get into the construction act. At the APLA conference, Ramon Duggan, an executive with regional energy exploration company Pluspetrol, profiled the $1.7 billion Camisea natural gas project, which started up last August in the jungle about 280 miles east of Lima.

"It can be classified as one of the major projects worldwide in the past decade," he said. The area may have 14.5 trillion cu ft of natural gas reserves, as much as 10% of which may be ethane--an unusually high concentration, he pointed out.

Duggan acknowledged that enthusiasm for petrochemicals in Peru has languished because of credibility problems: The Camisea project was conceived in 1981 and is only starting up now. However, now that the gas plant is onstream, he said, interest in chemicals is growing. The Peruvian government is considering two coastal locations for a petrochemical complex.

Peru will not become a large petrochemical producer anytime soon. Grassroots projects in the region, after all, take a lot of time. For example, a study of an ethylene and polyethylene project between Venezuela's state oil company and Mobil Oil was announced at the APLA meeting in 1999. An agreement between ExxonMobil and the state was signed only this year, and construction on the complex is likely still years away.