An Industry Siesta

Mother nature could not stop executives from gathering in Mexico City earlier this month for the 25th annual meeting of the Latin American Chemical & Petrochemical Association (APLA). The Mexican government, on the other hand, has proven to be a more formidable obstacle to petrochemical industry progress in that country.

The conference was originally planned for Cancun, but Hurricane Wilma slammed into the resort city two weeks before, and organizers had to scramble to relocate the conference to Mexico City. The conference went off without a hitch, and the 645 delegates who attended in Mexico City represented a mere 5% drop from the turnout expected at the original venue.

Just like the meeting, the petrochemical industry in Mexico is facing adversity. In particular, the Phoenix Project-a proposed $1.9 billion joint venture between Mexico's state oil company Pemex, Nova Chemicals, Mexico's Grupo Idesa, and polypropylene producer Indelpro-has recently been shelved.

The sticking point, Pemex officials said, was that the parties couldn't agree on a contract for the natural gas condensate feedstock on which the project would be based. The Mexican government was unwilling to allow Pemex to ink a contract for below the price of exporting the hydrocarbons to the U.S. Gulf Coast.

Arturo García, APLA's president and director of the Phoenix Project at Pemex, lamented Mexico's situation. The country hasn't had a major ethylene expansion in 15 years, and its ethylene output today is less than half that of Brazil's, a country that is endowed with hydrocarbons.

In 2004, García pointed out, Mexico had a $7 billion trade deficit in chemicals. But the amount of ethane produced by Pemex that is currently sold as fuel could support three ethylene crackers, he said. “Being a rich country in hydrocarbons, we have not taken advantage of resources to satisfy demand.”

Miguel Benedetto, director general of Mexico's National Chemical Industry Association (ANIQ), seconded García's arguments. “For a country with hydrocarbon resources, imports such as ours are not acceptable,” he said. “We need a change in the policy that the government has had on energy. We are rich in hydrocarbon resources; we have to find a mechanism to extract them and empower them.”

Héctor Moreira Rodríguez, Mexico's energy undersecretary, acknowledged that the country hasn't been able to stem dependence on foreign sources of chemicals and that it does not have a program to develop the petrochemical industry, as Saudi Arabia does.

Much like the organizers of the APLA conference, Pemex is exploring an alternative development plan. “We are starting with a smaller project and keeping alive the bigger project,” García said.

The company is planning to expand its Cangrejera ethylene cracker by 50%, to 900,000 metric tons of ethylene per year, by about 2009. The additional output is earmarked for a new joint-venture polyethylene plant that, according to García, is being negotiated with Idesa and Nova.

The Cangrejera expansion will be based on a natural gasoline feedstock. The pentane stream will be used to feed the cracker, and the hexane stream will feed an aromatics plant with an annual capacity for 700,000 metric tons of benzene, toluene, and xylene.

At its Morelos complex, meanwhile, Pemex is building a polyethylene plant. At the same time, García says it is conducting the basic engineering on a 50% expansion of its cracker there, which would bring ethylene capacity to 900,000 metric tons by 2009. The polyethylene unit is expected to be completed next year, so Pemex plans to feed it by temporarily restarting a small, idle cracker in nearby Parajitos.

The two ethylene expansions will also create an additional 300,000 metric tons of propylene capacity, which may be used to feed a polypropylene plant built by Indelpro, Pemex officials said.

Although Pemex and some local firms are expanding modestly in Mexico, some international chemical companies are more interested in other regions. Werner Prätorius, president of petrochemicals at BASF, gave a talk on the chemical industry's prospects in China. “I believe that China will be the undisputed growth engine for the global economy in the years to come,” he said. “If we want to grow, we have to go where the action is.”

Responding to a question about the likelihood that BASF would build a major petrochemical complex in Latin America, Prätorius said: “As impressive as the potential might be, we look east, and we look to China, and eventually we look to India. Latin America is still developing.”

Mexicans weren't the only ones complaining about their government. In the conference's keynote address, Peter R. Huntsman, chief executive officer of Huntsman Corp., had a few choice words.

Addressing the audience initially in Spanish, he acknowledged that President George W. Bush is a Huntsman family friend but added that “international relations are bad.” Huntsman also blamed inefficient energy policy for what he calls the U.S. fall from first to last place in global petrochemical competitiveness.

Elsewhere in Latin America, investments are moving forward. Brazilian state oil company Petrobras and Oxiteno, a regional manufacturer of ethylene oxide and derivatives, are planning a major refining and petrochemical complex for Brazil's Rio de Janeiro state. Pedro Wongtschowski, Oxiteno's managing director, told C&EN that the project, set for completion by about 2011, will be based on heavy oil that Petrobras currently exports.

The complex will have a heavy-oil refinery and a downstream deep-catalytic-cracking plant that will make about 1.3 million metric tons annually of ethylene as well as propylene, aromatics, fuels, and coke. Oxiteno will build a downstream ethylene oxide unit. Suzano is now mulling building downstream polyolefins plants (C&EN, Nov. 14, page 38).

The project comes with a hefty price tag: some $6.5 billion altogether, divided about evenly between the refinery and the chemical complex. “When you have a good project,” Wongtschowski says, “money is not an issue.”

That Petrobras, from a country relatively poor in hydrocarbon resources compared with Mexico, is prepared to commit to such a large investment while feedstock-rich Pemex cannot is an irony that wasn't lost on many APLA attendees.