Braskem Idesa Plans Mexico Growth After Resolving Pemex Feud
Braskem Idesa Plans Mexico Growth After Resolving Pemex Feud
(Bloomberg) -- Braskem Idesa SAPI plans to invest about $150 million to grow its flagship Mexico petrochemicals plant after resolving a conflict with state-owned oil producer Petroleos Mexicanos.
The joint venture between Mexico’s Idesa and Braskem, a subsidiary of Brazilian construction conglomerate Odebrecht, would use the investment to expand production by 20% at its Etileno XXI polyethylene plant by 2025, said Chief Executive Officer Stefan Lepecki in an interview on Wednesday.
The plant’s operations were suspended in December 2020 due to a dispute with Pemex over its supply contract, with President Andres Manuel Lopez Obrador accusing it of benefiting unfairly by paying only 25% of the market price for the ethane.
“We’ve established a new relationship with the government and Pemex,” Lepecki said. “Last year was a very important year for Braskem Idesa. We had an important dialog with Pemex, and we finally solved the issue around the supply contract. We have a clear strategy based on this new agreement with Pemex.”
Read More: Pemex to Sell Ethane to Braskem Idesa at 100% Global Price
Plant Expansion
Braskem Idesa aims to expand its petrochemicals complex in Nanchital, Veracruz after its ethane import terminal is completed at the end of 2024, said Lepecki. The expansion will allow the company to receive all of its ethane, a feedstock used for polyethylene production, from its import terminal instead of relying on Pemex for close to half its supply.
The $400-million ethane import terminal will have a capacity of 65,000 barrels a day, enough to supply all of the plant’s needs and even more if the plant is further expanded, said Lepecki.
Pemex and Lopez Obrador’s press office didn’t respond to a request for comment outside business hours, but the president said when the accord was reached a year ago that he backed the company’s terminal construction.
Cenagas, a Mexican government agency that oversees gas pipelines, cut off the company’s gas supply during the conflict with Pemex. In September of last year, Pemex and Braskem Idesa signed a new contract for at least 30,000 barrels a day of ethane, about half of the previous deal, until the new import terminal begins operating.
Braskem Idesa’s Lepecki said that the company is paying the international reference price for Pemex’s ethane plus logistics, without providing further details.
“For sure if you compare what used to be our agreement in the past and the new one, you have a loss here,” Lepecki said. “To compare with the previous agreement, the reality is another one. But in terms of pricing, we continue to be very competitive for North America.”
Today, the company uses a temporary facility to import about 20,000 barrels a day of ethane while receiving between 30,000 and 40,000 from Pemex. It expects to expand the capacity of the temporary facility to 35,000 barrels a day by August.
The company plans to produce 90,000 tons of polyethylene monthly in the second half of this year as it normalizes it operations after the supply issues with Pemex, which reduced it to 65% of production capacity last year.
Internal Investigation
Braskem Idesa’s environmental goals include meeting sustainability targets such as zero balance in terms of emissions by 2050. As part of its $1.2 billion issuance of sustainable bonds in October of last year, the company vows a total reduction of 50% in emissions by 2028.
A partnership with Mexican recycling company Alcamare will support its development of post-consumer resin, or PCR, solutions.
The company was named in a corruption probe involving former Pemex CEO Emilio Lozoya, who accused one of his predecessors Carlos Trevino of wrongdoing in his dealings with Braskem Idesa.
The company launched an internal investigation that showed no wrongdoing, and no company officials have been asked to appear in court after a request last year for Trevino to testify, Lepecki said.
The Attorney General’s Office that is handling the case said it didn’t have any immediate comment.
“Emilio Lozoya has had a lot of difficulty demonstrating everything he is talking about,” said Lepecki. “This is the past, we are looking to the future.”
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