Competing interests Cheap US shale gas may put several petrochemical projects planned in Latin America in jeopardy
L
ow cost ethane supplies in the US are driving new petrochemical investments in the country. But these new US projects are threatening the competitiveness of proposed cracker projects in other regions, particularly nearby Latin America. There are suggestions that some new projects proposed for Latin America could be downsized or even cancelled. Brazil, in particular, is watching developments in the US, where a string of companies have announced new cracker projects based on ethane extracted from new and abundant supplies of shale gas. Graça Foster, president of Brazilian state-owned energy group Petrobras, has expressed concerns about US shale gas output and its impact on natural gas prices. For petrochemicals, the low US prices will impact the competitive position of the Brazilian petrochemicals sector and could result in a migration of investments to the US, she said. There have been suggestions that
Petrobras’ refinery and petrochemicals project in Rio de Janeiro, southeast Brazil, could be reduced in scale as a result of the improved competitive position of US petrochemical investments. Under the current plans the Petrobras project, known as Comperj (Rio de Janeiro Petrochemicals Complex), would comprise two refineries plus an integrated ethylene and derivatives complex. But it has been reported in the Brazilian press that the petrochemicals part of the project – to be implemented by Petrobras affiliate Braskem – might be downsized or even eliminated. Petrobras, which holds a 25% stake
in Braskem, responded by insisting that the Comperj project will go ahead. ‘The project includes two parts, a refinery and a petrochemicals plant. It makes
economic sense when it is treated as integrated,’ Foster said. ‘We have urgent need for these two refinery trains and it makes perfect sense for us to complete the Rio de Janeiro Petrochemicals Complex.’ Together with the government,
Petrobras and Braskem will find a solution, she stressed. ‘We will work hard to maintain the project as it was originally conceived.’
In the meantime, Braskem, which is Latin America’s largest chemicals producer, is studying investment opportunities in the US. The company revealed in 2011 that it was considering a greenfield cracker and polyethylene project in the US to take advantage of cheap feedstock supplies. The company has also said it was seeking opportunities to use the shale gas to feed its polypropylene (PP) production in the country. Braskem became a major PP producer in the US in 2010 when it purchased PP assets from Sunoco. Another Latin American chemicals
major, Mexico-based Mexichem, is also seeking to take advantage of the low cost US feedstock. The company announced in July 2012 that it is in talks with US-based
‘We will work hard to maintain the [Rio de Janeiro Petro-
chemicals Complex] project as it was originally
conceived’ Graça Foster Petrobras
Occidental Chemical (OxyChem) to build a joint venture ethane cracker in the US. OxyChem would convert the ethylene into vinyl chloride monomer (VCM) at its site in Ingleside, Texas, and sell the VCM to Mexichem under a long-term supply agreement. For Mexichem, an integrated producer of PVC compounds, the OxyChem agreement will provide a guaranteed supply of the VCM feedstock it needs to operate its PVC plants in Mexico and Colombia. The joint venture cracker would have the capacity to produce about 500,000t/year of ethylene, enabling the production of some 1m t/year of VCM, Mexichem said. If the project goes ahead, the cracker could begin operations in 2016. The proposed Braskem and Mexichem/
Petrobras oil refinery in Curitiba, Brazil
OxyChem projects are just two of several cracker projects that have been announced in the US in the past 18 months. Other companies planning projects include Dow Chemical, ExxonMobil, Shell, Thailand’s Indorama Ventures and South Africa’s Sasol. Industry observers suggest that only five or six of the cracker projects announced or under study are likely go ahead in the US. But the new capacity will mean that companies planning projects in Latin America cannot rely on the US as a market for their output. The problem for Latin American
producers, says Petrobras’ Foster, is that the price of US shale gas as a chemicals feedstock is extremely attractive. ‘If the gas is available in significant volumes over the long-term, it is really capable of attracting the chemicals and petrochemicals industry in an intense form.’
Anna Jagger is a freelance journalist with a keen interest in the Latin American chemicals industry