A joint venture scheme to construct a major integrated PET and purified terephthalic acid (PTA) plant in Russia has collapsed after one venture partner, Mexican petrochemicals company Alpek SAB de CV, pulled out of the project.
In September 2013, Monterrey, Mexico-based Alpek and the Russian firm United Petrochemical Co. (UPC) agreed to form a partnership to build the PET resin and feedstock plant at Ufa in Russia's semi autonomous Bashkortostan Republic.
The project, to involve PET and PTA capacity each of 600,000 metric tons per year, was due to employ Alpek's ‘IntegRex' technology for both feedstock and PET production. The new plant was to be supplied with its essential raw material paraxylene by the locally based Russian integrated oil company and UPC parent JSOC Bashneft.
The Ufa partnership, into which each company had pledged $10 million, was owned 51 percent by UPC and 49 percent Alpek. The firms originally planned to complete the feasibility evaluation and front end engineering and design stages for the plant by March 2015.
But last month, when Alpek reported its fourth quarter 2014 results, the firm's chief executive José de Jesús Valdez announced his company's pull-out from the Russian joint venture.
“After an exhaustive evaluation process, we believe it was in our shareholders' best interest not to pursue this endeavor and exercised our exit option as laid out in the JV agreement,” the CEO explained. Alpek faced a $9 million asset impairment charge in the fourth quarter as a result.
Valdez reported that Alpek's cash investment in the project was partially offset by its ‘IntegRex' technology licensing income.
Doubts were previously cast on the future of the Ufa PTA/PET project on the Russian side of the venture late last year amidst allegations of money laundering and fraud at Bashneft companies.
Bashneft was acquired in 2009 by the publicly owned Russian conglomerate AFK Sistema but the oil company agreed to sell 98 percent of UPC directly to Sistema in 2013.
It was Sistema that planned the UPC joint venture deal with Alpek in 2013, but last September, Bashneft directors went back on the sale, returning UPC to Bashneft control. In December 2014, in the midst of continuing fraud investigations, Bashneft was taken back into state ownership, casting doubt on funding for future projects, including the PTA/PET plant, reported Russian news agency Interfax.
Alpek operates 17 plants in Mexico, the U.S. and Argentina including the largest expandable polystyrene unit in the Americas.