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December 02, 2020 03:46 PM

Braskem to halt operations at Ethylene XXI as Mexico cuts gas supply

Stephen Downer
Correspondent
Plastics News Correspondent
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    Braskem
    Braskem's Ethylene XXI petrochemical complex in Mexico.

    Mexico City — Braskem SA has started the process to halt operations at its massive petrochemical complex in the state of Veracruz after the Mexican government unilaterally ended natural gas supplies, the company said Dec. 2.

    Braskem said a Mexican state-owned agency, Centro Nacional de Control de Gas Natural (Cenagas) had informed it of the decision, which Mexican President Andrés López Obrador confirmed in an early morning news conference.

    Braskem and 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.

    "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 the news conference, according to a report from Reuters. "We cannot continue with that type of contract because otherwise we would be complicit in corruption."

    For its part, Braskem said in a statement released Dec. 2 that it is taking "applicable legal measures to protect its rights and find a solution for the issue, and it cannot estimate, at this time, the date for the return of its activities."

    "The company will keep the market informed of any developments relating to this matter to the extent required by applicable law," Braskem said.

    The news conference was the third verbal attack launched by López Obrador, a leftwing populist who has been in office for two years, against Braskem's Mexican affiliate Braskem Idesa S.A.P.I. in recent months.

    In August, Braskem rejected allegations of corruption in a feedstock deal with Pemex, signed a decade earlier, saying that all investigations "fail to support allegations that affirm or insinuate that Braskem Idesa has participated in any illegal or corrupt activity in Mexico."

    But López Obrador had already told journalists at a daily news briefing the same day that the contract between the two parties "has to be canceled in my opinion because it's unfair. It has to be reviewed."

    Pemex is bound by two contracts signed in 2010 to supply Braskem Idesa with 66,000 barrels of ethane a day over 20 years for the latter's $5.2 billion Ethylene XXI petrochemical complex in Nanchital on Mexico's Gulf Coast. The complex opened officially in June 2016.

    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.

    Lozoya is under house arrest in Mexico City, having been extradited from Spain in July. He is charged with fraud and money laundering.

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