The biggest shocker on the K 2004 materials beat came Oct. 21, just the second day of the fair, when Pemex Petroquímica SA, the Mexican national petrochemical firm, announced that Nova Chemicals Corp. will be its only non-Mexican partner in the long-discussed Phoenix Project.
Most of the surprise over Nova's selection came from officials at Saudi Basic Industries Corp. (Sabic) of Riyadh, Saudi Arabia. Just the day before, Sabic officials had confirmed at a news conference that their firm was a candidate for the project, and had discussed in general terms how output from the massive, $1.9 billion ethylene/polyethylene project would be divided.
``We are in discussions with a Mexican company about a regional investment in Mexico ... to produce petrochemicals for the Mexican market,'' Mohammed Al-Mady, Sabic vice chairman and chief executive officer, said at the Oct. 20 event. ``What's left from production would be exported to neighboring countries. We have technology [the Mexican company] can use, we've made big plants before and we've got a good relationship with Mexico.''
And yet when the decision was made the next day - and announced by Mexican President Vicente Fox - Pemex opted for Pittsburgh-based Nova, along with Mexican polystyrene maker Grupo Idesa and Indelpro, a joint venture between polypropylene giant Basell NV and Mexican conglomerate Alfa Group. The size of Pemex's stake in the project could be as high as 49 percent. It's undecided how the three other partners will split the size of their interests.
When reached Oct. 24, a Sabic spokesman declined to comment on the selection, saying only that Sabic ``remains interested in North and South America as markets for future growth.''
Ironically, Al-Mady had been questioned at the news conference about his firm's potential interest in Nova as an acquisition target. Al-Mady said Sabic was not looking to buy Nova or any other North American resin firm.
The next step in the Phoenix Project is for its partners to conduct a feasibility study before launching construction on an ethylene cracker and a pair of PE plants, all of which will take advantage of Mexico's low-cost natural gas resources. The partners also must choose a site between Altamíra, a northern Mexico petrochemicals hub that is closer to the U.S. market, or Coatzacoalcos, a southern Mexico site that would be closer to potential export customers in South America.
Mexican polymer production dropped from almost 18 billion pounds in 1996 to less than 7 billion pounds in 2002, as the country struggled with high feedstock costs and outdated technology. As a result, Mexico imports almost 60 percent of the petrochemical products it uses each year.
``We believe that this proposed complex has all of the ingredients to be the next logical supply increment for the North and South American ethylene/polyethylene markets,'' Nova President and CEO Jeff Lipton said in an Oct. 21 news release.
The project should begin production in 2009 or 2010, he added. Nova already ranks as one of North America's largest PS and PE makers.
Industry sources at K 2004 said interest in the Phoenix Project, which Pemex had been shopping around for several years, increased in 2004 as it became evident that high U.S. natural gas prices were not coming down any time soon: Phoenix increasingly looked like the last chance to obtain economical petrochemical feedstocks in the North American market.
But not every observer at K 2004 was convinced that Nova and its partners would find Phoenix to be an El Dorado, Mexico's fabled lost city of gold.
``I'll believe it when I see it,'' an executive with another Mexican resin supplier said of the project. ``Working with the Mexican government is very difficult because of all of its paperwork and red tape.''
The Mexican government ``also has high labor levels,'' the executive added. ``A lot of Pemex plants have twice the number of employees that they need. I don't know how Nova is going to deal with that.''