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Pemex And Braskem End Ethane Supply Conflict

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Mexican national oil company Petróleos Mexicanos (Pemex) and Braskem Idesa have reached an agreement on an ethane supply deal, ending a year-long dispute that threatened to shutter the largest petrochemicals operation in Latin America.

The Brazil-based Braskem SA unit said Pemex would supply 30,000 bpd of ethane to the Etileno XXI petrochemicals plant in Veracruz in the new pact. Braskem, in conjunction with Pemex and its subsidiaries, would also develop a $400 million ethane import terminal in Coatzacoalcos, Veracruz, for the plant’s supply.

Braskem Ideas, a joint venture between Braskem SA and Mexico’s Grupo Idesa, owns the Etileno XXI plant, which has capacity to produce 1.05 million tons/year of high- and low-density polyethylene. The plant uses ethane as its principal feedstock.

Pemex had struggled to provide Etileno XXI with the 66,000 bpd of ethane as agreed to under a deal signed by the previous administration. Late last year, Mexico’s natural gas pipeline operator Cenagas cut off transport service for the plant following complaints from Mexico’s government that the ethane supply contract terms were unfair to Pemex.

This forced the plant offline. Cenagas subsequently restored gas supply on the condition that the parties would come to a new feedstock supply agreement.

“It’s great news to see Braskem Idesa and Pemex reach a deal on this project,” said Adrian Duhult of the Baker Institute, Rice University. Duhalt is a postdoctoral fellow in Mexico energy studies at the Houston think tank. “It is badly needed and will be an important boost for the petrochemical industry in the region.”

Braskem stated that all previously existing contractual pending issues, have now been settled.

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

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

“The terminal also fits into the objectives of the Interoceanic Corridor in the Isthmus of Tehuantepec, which, apart from being one of the most important regional development initiatives of president López Obrador, seeks to elevate the industrial profile of the region, and that includes petrochemicals,” Duhult added.

López Obrador has long touted the Interoceanic Corridor project’s potential benefits, saying it would propel the economies of Oaxaca and Veracruz through a focus on industrial projects. The corridor project would involve the construction of 10 industrial parks, along with road, railway, natural gas, telecommunications and electricity infrastructure. The corridor project would also link the deep-water ports of Coatzacoalcos and Salina Cruz on either side of the 77-mile isthmus with a natural gas pipeline and would include a liquefied natural gas export facility proposed for Salina Cruz.

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