Braskem and Idesa join Pemex project; Mexichem drops out

MEXICO CITY (Nov. 9, 11:40 p.m. ET) -- PVC and specialty chemicals maker Mexichem SAB de CV said Monday it withdrew from a consortium planning to build a $1 billion ethylene cracker on Mexico’s Gulf coast because the conditions were not right.

Pemex Gas y Petroquímica Básica, a subsidiary of state oil company Petroleos Mexicanos, last weekend announced the signing of a memorandum of understanding for the cracker’s feedstock with Brazilian petrochemicals giant Braskem SA and Grupo Idesa SA de CV, of Mexico City.

The tentative agreement calls for Pemex to supply Braskem and Idesa with 66,000 barrels of ethane per day for the cracker, which will be built in Coatzacoalcos, Veracruz state, by “about 2015,” Pemex said in a statement.

Braskem and Idesa will “build, develop and operate” the cracker, Pemex said, adding that it will have a production capacity of about 1 million metric tonnes a year “and substantially reduce the importation of petrochemical products derived from ethane.”

Back in early 2008, the Mexican government made its authorization of the cracker’s construction conditional on the interested parties’ sealing a long-term feedstock deal with Pemex Gas.

The oil company also said the government wants the project, known as Ethylene XXI, to include polymerization units to allow for polyethylene to be produced at the site.

Such an expansion would cost an additional $2 billion, people close to the scheme have suggested.

São Paulo-based Braskem, Latin America’s largest petrochemical company, and Idesa, in existence for 50-plus years, have not said which other companies, if any, will join them in a new consortium for the project.

The original consortium included, apart from Braskem and Idesa, Mexichem and Alpek SA de CV, a subsidiary of Mexico’s publicly owned Alfa Group, of Garza García, near Monterrey.

“We thought the conditions for this project were not the ones we wanted, so we decided to withdraw,” Enrique Ortega, investor relations director of Mexichem, of Mexico City, told Plastics News Nov. 9.

An Alpek spokesperson was not immediately available for comment.

Idesa has had a longstanding interest in Ethylene XXI and supported Pemex’s original Phoenix Project, the forerunner of Ethylene XXI.

Proposed during the regime of President Vicente Fox, President Felipe Calderón’s predecessor, Phoenix aimed to supply 2.64 billion pounds of ethylene and 1.32 billion pounds of propylene per year, from 2009.

The project was canceled after several years' planning when Pemex and its private sector partners, including Idesa, Nova Chemicals Corp. of Pittsburgh, and Indelpro SA de CV of Monterrey, failed to agree on feedstock prices.

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