Petrobras starts arbitration against Odebrecht over Braskem as sale process begins; Market for 'green' methanol still in early stages; Biopolymer PLA market to double in five years
Petrobras starts arbitration against Odebrecht over Braskem as sale process begins
Brazilian state oil company Petrobras started an arbitration against engineering and construction company Odebrecht for about $150 million in indemnization over agreement violations related to Latin America’s biggest petrochemical company Braskem, majority owned by Odebrecht but with Petrobras owning a minority stake.
Braskem, which also has operations and assets outside of Brazil that include five polypropylene plants the United States, “is not part of said arbitration, that is protected by confidentiality,” Petrobras said on Dec. 28 in a press release.
Petrobras CEO Roberto Castello said in June during a live interview organized by media Valor that state oil company officials were holding talks with Odebrecht regarding accord revisions related to Braskem. He reiterated Petrobras planned to sell its stake in the company, according to G1 Globo.
Petrobras owns about 36% of Braskem outstanding shares and 47% of voting rights stock. Odebrecht, which holds just over half of Braskem’s voting shares, also announced in mid-2020 it started to take actions and prepare for what could result in the sale of up to its total participation in Braskem. The sale was to meet obligations to its creditors, Odebrecht told Brazilian stock authorities in a filing.
Pedro van Langendonck, Braskem’s CFO, said on Nov. 13 that Braskem has been providing information to its owners, according to a transcript of the company last earnings call published by Yahoo Finance.
Braskem owners advised that they would start a sale process, he said. “But we are not a part of that process. So we are not expecting to have to engage with multiple counterparties,” he said.
Braskem is the biggest polypropylene producer in the United States. Braskem has its administrative offices in Brazil, where it runs 29 industrial units.
Braskem also has a majority stake in an ethylene-polyethylene complex in Mexico completed about five years ago that in early December was forced to abruptly shut down as Mexican officials cut natural deliveries amid a dispute with the Mexican government over an ethane supply contract.
Mexican President Andres Manuel Lopez Obrador has cited Odebrecht’s past history, and said the contract's pricing terms, and penalties for failure to deliver, were unfair to Mexicans and possibly involved corruption.
In December 2016 Odebrecht and Braskem pleaded guilty before authorities in the Eastern District of New York and agreed to pay $3.5 billion to resolve charges with authorities in the U.S., Brazil and Switzerland,” the U.S. Department of Justice said at the time.
Charges were related to “their schemes to pay hundreds of millions of dollars in bribes to government officials around the world,” the department added. Braskem has denied however any corruption in Mexico, saying the contract resulted from an international bidding.
The corruption investigations leading to the 2016 accord had started in Brazil with probes of Petrobras officials over the acceptance of bribes in exchange for contracts with private companies, including Odebrecht.
Braskem separately said on December 22 that it renewed with Petrobras contracts for the delivery of naphtha and ethane for its plants in Sao Paulo and Rio de Janeiro, all to be priced based on “international references.”
‘Green’ methanol still in very early stages to become viable
‘Green’ methanol is nowhere close to becoming a viable alternative to its fossil fuel-based version because production costs are much higher than what the market would pay, the top official of the world’s biggest methanol producer said.
“Some of our customers are asking us for green methanol, as we call it. And obviously, want to pay the same as what we call regular methanol from natural gas, which the economics are quite different,” John Floren, CEO of Vancouver-based Methanex, said during the company's most recent earnings discussion, according to a Motley Fool transcript.
“We have a project in Iceland that we've invested in that takes CO2 off of a power plant, takes water through electrolysis, makes hydrogen and oxygen, the oxygen goes in the air, we use the hydrogen to make methanol and that's so-called green methanol which has no carbon,” he said.
“It's possible, very expensive and hard to scale it. So, you'd have to make a lot of these all over the world, a lot of capital involved and probably the price you'd need is $800, $900 a tonne to make a goal of it,” he said.
“Some of our customers would like to see non-carbon or green methanol, but they're not prepared to pay $800 to $900 a tonne today on for a lot of volume. Maybe there's some niche application that could work where they want to take advantage of some of the government subsidies around credits, etc. But that's not a way to build a business,” he added.
“So we'll continue to look at it, and there's lots of other things we can do. And including in Louisiana using natural gas that's made from a zero carbon source and using that through our plant we can then have zero carbon methanol. But these are, I'd say, very small volumes today,” he said.
Market for bioplastics based on polylactic acid to double in five years
The global market for lactic as well as polylactic acid (PLA), raw materials for biodegradable plastic, are expected to nearly double in five years, according to findings of a research by Markets and Markets published on Dec. 16 through PRNewswire.
The global lactic acid market size is estimated at $1.1 billion in 2020 and projected to reach $2.1 billion by 2025. The global polylactic acid market size is estimated at $786 million in 2020 and projected to reach nearly $1.8 billion by 2025, it said.
“The rise in consumer awareness to mitigate food wastage and the increasing consumer demand for convenience food and beverages with increased shelf-life has been boosting the lactic acid market, globally,” it said.
Demand for polylactic acid market in applications such as packaging, fiber and fabrics, agricultures, among others, has been rising in part thanks to actions of some governments around the world, it added.
Governments worldwide are looking at reducing carbon emissions and eliminate waste in a trend that could help biodegradables, but challenges for a faster market expansion of bioplastics remain.
By Renzo Pipoli