Pemex and Braskem Idesa end ethane supply to partner with import terminal

Mexico’s national oil company Petróleos Mexicanos (Pemex) and Braskem Idesa reached an agreement on the supply of ethane, ending a year-long dispute that threatened to shut down Latin America’s largest petrochemical operation.

The Brazilian unit of Braskem SA announced on Tuesday that Pemex would supply 30,000 b / d of ethane to the Etileno XXI petrochemical plant in Veracruz as part of the new pact. Braskem, in collaboration with Pemex and its subsidiaries, would also develop a $ 400 million ethane import terminal at Coatzacoalcos, Veracruz, to supply the plant.

Braskem Ideas, a joint venture between Braskem SA and the Mexican group Grupo Idesa, owns the Etileno XXI plant, which has a production capacity of 1.05 million tonnes / year of high and low density polyethylene. The factory uses ethane as the main raw material.

Pemex had struggled to supply Etileno XXI with the 66,000 bpd of ethane as agreed under an agreement signed by the previous administration. At the end of last year, the Mexican pipeline operator Cenagas halted the plant’s transportation service following complaints from the Mexican government that the terms of the ethane supply contract were unfair to Pemex. This forced the factory offline. Cenagas subsequently restored the gas supply on the condition that the parties enter into a new raw material supply agreement.

“Significant increase”

“It’s great news to see Braskem Idesa and Pemex come to an agreement on this project,” said Adrian Duhalt of Rice University at the Baker Institute. Mexico GPI of NGI. Duhalt is a postdoctoral fellow in Mexican energy studies at the Houston Think Tank. “This is absolutely necessary and will be a big boost for the region’s petrochemical industry.”

Braskem said all “previously existing outstanding contractual issues” had been resolved. Last year, the company said Pemex had accumulated tens of millions of dollars in unpaid credit notes to Braskem Idesa in damages for the supply of ethane below contract volumes.

Braskem now sees the operational start of the ethane import terminal for the second half of 2024. The amendment to the agreement also gives Braskem Idesa “the right of pre-emption to acquire all the ethane that Pemex has and does not have. has not consumed in its own production process until 2045, at international reference prices.

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Improve the outlook?

The dispute had been seen as a symbol of an adversarial relationship that had developed between the Mexican government and the private sector.

Pemex and Mexican President Andrés Manuel López Obrador “have no reason not to work with private companies to turn the tide in other key petrochemical value chains. The next in line should be ammonia, ”said Duhalt.

Duhalt said the construction of an ethane import terminal in southern Veracruz “highlights that there is more to Mexico’s energy sector than the production and refining of crude. This project demonstrates that private investment can also benefit public interests.

He said the new ethane supply would have a “positive impact” and provide Pemex petrochemical complexes in the region with increased access to imported ethane. This in turn could stimulate economic activity, he said.

“The terminal is also in line with the objectives of the interoceanic corridor in the Isthmus of Tehuantepec, which, in addition to being one of the most important regional development initiatives of President López Obrador, aims to raise the industrial profile of the region, including petrochemicals. . “

López Obrador has long touted the potential benefits of the Interoceanic Corridor Project, saying it would propel the economies of Oaxaca and Veracruz with a focus on industrial projects. The corridor project would involve the construction of 10 industrial parks, as well as road, rail, natural gas, telecommunications and electricity infrastructure. The corridor project would also connect the deepwater ports of Coatzacoalcos and Salina Cruz on either side of the 77-mile Isthmus with a gas pipeline and include a proposed liquefied natural gas export facility for Salina Cruz.

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