Braskem-Idesa´s mid-2022 production hit by power, ethane supply problems
The Braskem-Idesa ethane cracker and polyethylene plant in the Mexican state of Veracruz saw lower production and sales in the second quarter 2022 due to energy problems as well as lower-than-expected ethane shipments from Pemex.
The plant, owned by a venture led by Brazil-based Braskem and Mexican group Idesa and with 1.1-million tonnes-per-year polyethylene capacity, operated at 67% of capacity in April-June, investor relations director Rosana Avolio said while discussing the company´s second quarter earnings on Aug. 11.
Sales volume declined by 13% when compared with the preceding quarter due to the lower product inventory at the Nanchital, Veracruz complex. Inventory availability from production during previous quarters helped, officials said.
Construction of a new ethane terminal that would allow the company to run at full capacity, and perhaps contemplate an expansion in coming years, has already started, Braskem said.
Braskem Idesa and Advario, a partner chosen by the company this year for the equal venture, will build infrastructure to accommodate imports of up to 80,000 bpd of ethane, or about “120% of current feedstock needs,” officials said. Imports will come from nearby Texas just to the north across the Gulf.
The estimated $400-million project will be completed by the second half 2024, the venture has said.
The terminal was built to reduce, or even eliminate, Braskem-Idesa´s reliance on Pemex for ethane. However, access to ethane from Pemex provides the best value option for Braskem Idesa compared with U.S. imports, Braskem officials said.
Braskem Idesa completed construction of the $5.2-billion plant in Nanchital, Veracruz back in 2016.
Construction started following a Mexican auction of ethane supplies over a decade ago won by Braskem Idesa. But Mexican ethane production levels fell during the decade which led to disputes over fines for failing deliveries and a renegotiation of the contract in 2021.
The Mexican decline in ethane production forced Braskem Idesa to come up with solutions and invest in the import terminal. Back in late 2019 the company first announced its plans for an ethane terminal to bring feedstock from Texas and make up for the Mexican ethane shortages.
Pemex operating problems
“When you look at fourth quarter 2021, first quarter 2022, they provide volumes above the contracted volume of 30,000 bpd,” said Danilo Garcez, manager of the Nanchital, Veracruz plant, referring to Pemex deliveries.
But in the April-June period, mainly because of operating problems at the processing center for gas, the company faced difficulties to reach the contract volume especially during April and May, those two months,” Garcez said.
There was some recovery in June and July with the expectation that they will be up to the 30,000 bpd-level. As of early August 2022, deliveries were “falling below, but on average, close to 30,000 bpd,” Garcez said.
Mexican ethane production has declined compared with a decade ago as a result of lower hydrocarbons production in Mexico.
To bridge the gap and run the plant at some significant level of capacity despite the Pemex supply problems, Braskem Idesa implemented in early 2020 what it called a fast-track system to allow some ethane imports while the terminal was planned and built.
“We closed June at above 24,000 barrels in June alone,” Garcez said.
The terminal´s design for 80,000 bpd is the necessary volume to run Braskem Idesa at 100% capacity and to also account for future expansion plans of up to “about 15% of total capacity for the whole complex,” Garcez said.
The current contract between Pemex and Braskem Idesa, as detailed by Garcez, calls for a minimum 30,000-bpd delivery. However, the new agreement doesn´t force Pemex into paying fines for not meeting the volume, unlike the previous contract that was re-negotiated in 2021.
Back in September 2021 the agreement with Pemex was for “a minimum committed volume of 30,000 barrels, which goes until the delivery of the terminal,” expected to happen in the second half of 2024, he said
“From then on, we have the right of first refusal, which will last through 2045 for all the surplus ethane produced by Pemex,” not used by Pemex, Garcez said.
Expansion in “radar”
Braskem´s CFO Pedro van Langendonck Teixeira de Freitas, said that an exploration into the possibility of expanding the Nanchital plant is in the company´s “radar” but not for a couple of years. The Braskem Idesa plant has not operated at full capacity since it started running.
“Once the demo is up and running, we could even move forward with expansion plans of Braskem Idesa because it was designed with expansion in mind. The cost is very competitive, and it is in our radar for 2025 to explore expansion possibilities,” Freitas said.
Braskem, with headquarters in Sao Paulo, Brazil, is Latin America´s biggest petrochemical company. Braskem is majority owned by Novonor, and with state oil Petrobras as minority partner. Braskem is also North America´s biggest polypropylene producer.
State oil company Pemex officials have said that they plan to work on improving the six refineries owned by the company during the next three years to improve production. Pemex dedicated the first three years of Mexican President Andres Manuel Lopez Obrador term to building new crude refining capacity.
Braskem is majority owned by Novonor, formerly known as Odebrecht, and led by the Brazilian Odebrecht family with state oil company Petrobras as the biggest minority partner.
By Renzo Pipoli