Latin Progress

Rina Quijada, head of the Houston-based consulting firm IntelliChem, is tired of talk from chemical executives about grandiose plans for Latin American petrochemical projects, few of which seem to end up with steel in the ground. So she went looking for proof that projects are advancing.

Quijada asked her contacts around the industry for photographs showing progress. A few obliged. And during a talk in Buenos Aires earlier this month at the annual meeting organized by Latin America’s chemical trade association, Asociación Petroquímica y Química Latinoamericana (APLA), Quijada included the images in her overheads.

She showed a picture of farm equipment harvesting sugarcane from a Brazilian plantation that will feed a biobased polyethylene plant Dow Chemical is planning. Another photo showed a polyethylene terephthalate (PET) complex under construction in Pernambuco, Brazil. One contact sent Quijada a video that showed backhoes and bulldozers ambling around hilly Mexican terrain as evidence that site preparation for a multi-billion-dollar petrochemical complex was beginning in earnest.

The presentation delighted the audience at APLA, the largest chemical gathering in the region. This year, it attracted almost 900 attendees, a record for the event. Many of them have decades of experience in the region’s chemical industry. They have witnessed the unveiling of countless plans for billion-dollar chemical complexes for Latin American nations only to see the projects gradually fall by the wayside.

Insufficient chemical capacity in the wake of stunning economic growth has become a problem in Latin America. The region has resorted to importing chemicals, frequently from the U.S., to cover its needs. For instance, when it opens next year, the PET complex in Pernambuco will use p-xylene procured from abroad.

Some reasons chemical projects have difficulty advancing are familiar: not enough raw materials and too much government red tape. But regional players hope that shale gas, biobased feedstocks, and new oil discoveries in the region may finally fuel substantial growth for the petrochemical sector.

The conference was opened by one of the most seasoned Latin American chemical executives: Pedro Wongtschowski, chief executive officer of Ultrapar, a Brazilian conglomerate that owns specialty chemical maker Oxiteno. Regional gross domestic product, he pointed out, has nearly doubled since 2005, hitting close to $5 trillion.

“There has been a significant increase in demand for chemicals,” he remarked, “but supply isn’t keeping up.” He noted that regional production of the building-block chemical ethylene barely moved from about 6.4 million metric tons in 2006 to 6.8 million tons in 2010. Over the same period, imports of chemicals increased from $22 billion to $56 billion.

Individual countries present their own stumbling blocks. In Argentina, Wongtschowski noted, raw material supply and logistics have been obstacles. In Mexico, the problem has been access to raw materials that ought to be abundant, given the country’s oil and gas resources.

There is one common denominator, Quijada said. “Seventy percent of the odds that a project will really emerge in a country come from political support,” she noted. “If there is no political support, then the project won’t make any progress.”

For its part, the Mexican government is trying to be more supportive. Over the years, Mexico has failed on multiple occasions to establish a new petrochemical complex. The hang-up has often been the failure of Pemex, the state oil company, to offer competitive prices for feedstocks.

Jaime Hernando López Restrepo, the director of commercial development for Mexico’s Secretariat of Energy, spoke at the APLA meeting about what he sees as a successful change in policy. He said the Mexican government has become more willing to cede some of its hold on the country’s hydrocarbon sector and bend a little more on long-term contract prices. “If we have competitive prices, we can attract competitive investment,” he said.

The new policy, he said, has induced roughly $5 billion of investments that should increase Mexico’s petrochemical capacity some 33% by 2016.

The largest of these is a $2.5 billion ethylene and polyethylene joint venture between Brazil’s Braskem and Mexico’s Grupo Idesa that was beginning the site preparation work shown in Quijada’s presentation.

National oil companies in the region have been clearing another obstacle for the chemical industry by boosting hydrocarbon reserves. The biggest of these is the 2006 “presalt” oil and gas discovery off Brazil’s coast that Petrobras has been developing.

Shale oil and gas have reinvigorated the U.S. petrochemical sector and may be coming to Latin America. In February, Pemex conducted a successful test of a well in the Eagle Ford formation, which extends into the U.S. In Argentina, the oil and gas producer YPF has been making shale finds. “Shale gas is good news in the medium term, but it won’t happen overnight,” remarked Argentinian natural gas consultant Roberto Brandt at the conference.

Increasingly, Latin American executives have been looking beyond oil and gas for feedstocks. APLA attendees heard from large companies such as Braskem and Dow on their plans for biobased chemicals.

Dow already has land dedicated to growing sugarcane that will be used in a new ethanol distillery. The ethanol will be dehydrated into ethylene, which will feed a 350,000-metric-ton-per-year linear low-density polyethylene plant planned for 2015. Although growing sugarcane might seem unusual for Dow, Luis Cirihal, the firm’s director of renewable raw materials, said vertical integration is essential for good economics. For instance, dehydrating ethanol on the site eliminates the need to transport the ethanol.

At the conference, Braskem’s polyethylene business director, Marco A. Quirino, noted his company’s desire to become a “global leader in sustainable chemistry.” Braskem has been making polyethylene from ethanol commercially since 2010 and has plans for more polyethylene and polypropylene plants based on ethanol. Still, after his talk, he conceded that such polyethylene “will be a niche in the range of 5% of production” through 2020.

At the event, Wongtschowski told C&EN that Oxiteno may be joining the ranks of companies producing chemicals from biobased sources. He said the company is actively considering a project to make biobased ethylene oxide and ethylene glycol. Wongtschowski said Oxiteno may source biobased ethylene from Braskem for subsequent oxidation into ethylene oxide. “We are talking with Braskem to determine the most attractive option for all parties involved,” he said.

Such a project would be modest: basically a supply agreement to run a new kind of ethylene through an existing ethylene oxide and ethylene glycol plant. Time will tell whether the bigger plans for development finally bear fruit in the region. The evidence suggests they just might.