Mexico City — Braskem Idesa S.A.P.I. says the government agency responsible for forcing it to shut down its giant petrochemical complex in Mexico acted irresponsibly and endangered human life and the environment through its actions.
It said it plans to take legal action against the Mexican government after the latter unilaterally suspended feedstock supplies to the giant Ethylene XXI complex in Veracruz state.
"The National Natural Gas Control Center [Cenagas] informed Braskem Idesa on Nov. 30 that it would not renew the Firm-Based Transportation Services Contract for the transportation of natural gas," the Brazilian-Mexican joint venture wrote in a Dec. 2 news release.
"It also blocked the entry of gas the following day, in breach of the Intermittent Base Contract in force and without taking into account Braskem Idesa's request to maintain 48 hours of reduced supply to stop its operations in a safe manner for people, neighbors and the environment."
Braskem and Mexican President Andrés López Obrador's administration have been at odds in recent months, with the president accusing the parent company of Braskem of bribing a former official of the state oil company Petroléos Mexicanos (Pemex) for a deal on its gas supply before he took office.
"They want us to continue selling them gas, ethane, at 25 percent of the market price and that Pemex subsidize 75 percent of the cost," López Obrador said at a Dec. 2 news conference, according to a report from Reuters. "We cannot continue with that type of contract because otherwise we would be complicit in corruption."
The action by the government-run gas supplies Cenagas "have caused the total suspension of the plant's processes," Mexico City-based Braskem Idesa added in his lengthy statement, "with the consequent and negative repercussions not only for us, the plant, our customers, suppliers and employees but also for the hundreds of businesses that depend on this supply chain, affecting the national petrochemical industry and the economy as a whole.
"The decision violates our rights including multiple legal provisions in force."
Braskem Idesa said it had always behaved "in accordance with the legality and legal framework of our country" and met "the most demanding international standards and practices."
"We have repeatedly expressed our willingness to discuss with the authorities the issues that are raised today in relation to the operation of Braskem Idesa and its contracts with Mexican state companies, bringing proposals for solutions," the statement continued.
"We ask that the rule of law and respect for the law, commitments expressed by this [López Obrador] administration, guide this controversy and allow us to rectify the decisions made by Cenagas, which is a challenge to, among other things, the safety of our operations.
"We inform the national and international financial community, our clients, suppliers, employees and collaborators that Braskem Idesa, in compliance with its fiduciary and corporate responsibilities, must take the actions that exist within the framework of the law to defend its rights and investment."
The dispute will have a severe impact on the Braskem Idesa, which supplies materials for both domestic and export use, according to analysts.
“Even though this situation is related to the supply of natural gas, the action is evidently indirectly related to the controversy in the case of the ethane supply contract with Pemex,” said one analyst.
“No doubt this measure will have a severe impact on the company and to the polyethylene markets, both domestic and export, in addition to the financial effects.”
The $5.2 billion complex in Nanchital, on Mexico's Gulf Coast, came on stream in June 2016, with a commitment by state energy company Petroléos Mexicanos (Pemex) to supply Braskem Idesa with 66,000 barrels of ethane a day over 20 years.
President Manuel López Obrador, who is starting his third year in office, considers the transaction, completed in 2010, to be an example of the rampant corruption he alleges existed in Mexico over the four decades before he took office.
Brazilian conglomerate Odebrecht SA has about a 30 percent stake in Braskem. The Mexican government has accused Odebrecht of bribing Emilio Lozoya Austin, Pemex's managing director during the previous Enrique Peña Nieto government.
The deal had cost Mexico at least 15 billion pesos ($682.5 million), not only in price subsidies awarded to Braskem Idesa but in fines paid by Pemex for failing to fulfill its contractual obligations, López Obrador said.
"We will recover what we can," he said during a mid-summer YouTube broadcast, adding that Mexico stopped paying the fines when he became president.