Pemex and Cenagas restart gas, ethane flows to Braskem Idesa after signing of documents

Braskem Idesa officials signed with Mexican state oil company Pemex and the National Center for Control of Natural Gas, known as Cenagas, an accord that brought back natural gas supplies to its ethylene/polyethylene complex in Veracruz that had been abruptly cut in December.

Image courtesy of Braskem Idesa

According to Braskem Idesa, the accords signed will lead to ”discussion of potential amendments to the ethane supply contract and for the development of an ethane import terminal.” It includes an agreement for natural gas transport service with CENAGAS, with a term of 15 years, it said.

“With the execution of these documents by Braskem Idesa (BI), BI immediately commenced to receive the service of natural gas transportation, which had been unilaterally terminated as disclosed in the material fact notice dated Dec. 2,” Braskem Idesa said.

Braskem Idesa reported at the time that the cutoff of natural gas in early December had negative consequences included lacking enough time to prepare better for a safer shutdown, and alert its suppliers and employees, as well as to all other businesses in the value chain.

Braskem said it cannot predict the outcome of talks with Pemex, its shareholders and creditors but will keep the market informed of developments to the extent required by law.

On January 7 Braskem Idesa filed a statement to announce that it had “partially resumed its operating activities based on an experimental business model, following the applicable safety standards, to reduce the impact on the Mexican plastic industry's supply chain.”

Pemex, Braskem sign understanding

Octavio Romero, general director at Pemex, said in early March that Pemex agreed to supply 30,000 barrels per day of ethane for three years, without any obligation after 2024. The previous accord was for 66,000 barrels per day for 20 years and possible extensions.

This new accord allows a fair price because before they were paying 30% below the international reference, Romero said. In addition, Pemex had to pay all the ethane transportation expenses.

Pemex agreed in the new accord to cooperate so that Braskem Idesa can install a gas and ethane terminal and solve its supply problems.

Mexican President Andres Manuel Lopez Obrador has said Pemex will give its excess supply of ethane to the Braskem Idesa complex and support Braskem Idesa’s intention to build a terminal in Coatzacoalcos to receive ethane.

Braskem has found for nearly a year alternatives to import the ethane from the U.S.

Braskem Idesa started production in 2016. 

Early in 2020 Braskem Idesa was insisting on collecting all deliveries as well as penalties for any non-compliance.

Braskem Idesa has maintained that it has never been involved in any wrongdoing in Mexico. It said it participated in public bidding with international finance organizations and lenders involved.

Pemex annual production drops

Pemex reported on Feb 26 that the total petrochemical production in the year 2020 fell more than 15% to 1.4 million tonnes

Pemex total production of petrochemicals in the fourth quarter was 366,000 tonnes, or a 4.6% increase; methane derivatives rose 21% to 112,000 tonnes; ethane derivatives fell 21% to 77,000 tonnes.

Production in the fourth quarter of gasolines rose 1.4% to 184,000 barrels-per-day (bpd). Diesel production fell 14.7% to 101,000 bpd, Total crude oil processing in the fourth quarter rose 4.9% to 584,000 bpd.

By Renzo Pipoli