Roberto Bischoff
Director General
Braskem Idesa
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View from the Top

Changing the Landscape in the Petrochemicals Sector

Wed, 01/20/2016 - 11:06

Q: What finishing touches is Braskem Idesa giving to the Etileno XXI project?

A: Braskem Idesa was scheduled to start operating between January and the beginning of February 2016, but we had some issues that required us to intervene in the importation of equipment. The original design underwent some minor changes that delayed the start of operations, but we expect to produce our first batch of polyethylene by the second half of 2016. For the last three years, we have been working on the construction of this important project that will produce 1.05 million tonnes of polyethylene annually. The project is composed of four industrial units. The most important one is the cracker, which will be the first to initiate. It has three polyethylene plants, two of which are already completed.

Q: What is the expected impact of reaching your market share objective in the Mexican industry?

A: PEMEX currently supplies 30% of the polyethylene demand in the country, and Etileno XXI is poised to supply 50% of the demand in the following five years. We are working closely with a new producer that will be entering the market with a local product adapted to the needs of the area. Alongside this new partner, Braskem Idesa is differentiating itself in the market by developing solutions that will satisfy the requirements of Mexican consumers. This will be key, because North American companies that currently supply PEMEX and the rest of the market do not align themselves with the demands of Mexican customers.

Q: To what extent is there an opportunity for Mexico to fulfill market needs in Brazil considering its low supply of raw materials?

A: Initially, we are going to be supplying Central America as a key market and focusing on the US. It is important that North America has an integrated market for polyethylene. We are also going to be supplying other regions such as Europe, and the South American west coast using the Braskem network for distribution. The polyethylene market is global and tradeable, so we are going to be continuously assessing the needs all the regions that are profitable for our exports.

On a long term basis, Brazil has not developed opportunities to supply a competitive stock that is required for this type of industry. The development of pre-salt in Brazil could potentially provide enough stock for new projects, but the key lies in finding a competitive equation that permits the long term supply of these materials. Mexico is facing a period of reforms and changes in its own stock market that could also generate medium and long-term opportunities for us nationally. Nevertheless, it is too early to discuss these types of market situations. Both Mexico and Brazil have a chance of promoting the investment of longterm projects as long as their policies are implemented successfully, which is highly probable.

Q: What have been the most significant developments of Etileno XXI’s logistics zone facilities, and how are they being interconnected to the infrastructure in the Port of Coatzacoalcos?

A: We have developed a flexible logistics strategy in which we decided to invest in a platform that is capable of supplying the domestic market according to new and existing demands, resulting in the development of large and bulky 25kg bags to gratify the mass. In addition, we have adapted our logistics platform to be able to evaluate and explore markets competitively. Along with logistic flexibility, we have formulated partnerships with other companies to assess Mexican ports so that they can position themselves to export to any international market included in Braskem Idesa’s strategy.

Q: How will the company push innovation and product development?

A: Braskem Idesa is a new company that established a structured long term pre-marketing program that allowed it to sell 100,000 tonnes last year. I would not qualify us as an entering company because we are already present and growing. A company in this situation should have a strategy that allows proximity to customers, working with them to develop specific solutions to fit their needs. In this landscape, innovation plays an important role, and we are taking advantage of the infrastructure implemented by Braskem in the US and Brazil, which is advanced technologically and innovatively. In fact, our long-term goal is to integrate the company with the Braskem network in these countries.

Our plants are developing infrastructure that allows us to individualize the solutions we offer our clients, which has required millions of dollars in investments. All types of solutions that may in some way alleviate our customers’ problems are the type of investments that need to be seen at the site. This includes an integrated laboratory that controls the quality of the production in which we integrate our product development control program. Our current focus is to continue developing new methods that will improve the services we offer to customers.

Q: What is making the downstream sector attractive to investors, considering its financial record when compared to other PEMEX subsidiaries?

A: The financial landscape is being impacted by the change in oil and gas prices, which is affecting the industry in North America and all over the world because it is a globally traded product. Mexico is undergoing changes that are improving the market, and for this reason, we decided to invest in 2010, even before the reform and the shale gas boom. The project was conceptualized and planned thoroughly and it has stayed competitive in the new scenario that the Energy Reform has created. Braskem Idesa will be an important player in this market and in the industry. We expect to be recognized by our capability of fulfilling the needs of both the market and our customers. We are in a position to be a key player in an important and growing sector, and preparations are being made accordingly. Braskem Idesa plans to be one of the most significant investors in Mexico and Latin America by implementing a US$329 million plan this year. The money will be allocated to completing our project and fulfilling obligations with the banks to fund some reserve accounts.

Q: To what degree does Braskem Idesa anticipate the entry of new players as a result of the Energy Reform?

A: The dynamic relationship between the prices of bulk feedstocks and oil has generated important fundamental changes in the petrochemical and petroleum industry. The key point of establishing opportunities for new entrants in the Mexican domestic market is the provision of competitive feedstocks that can only be seen on a longterm basis. This is a challenge considering that the shale gas revolution has generated an increase in the availability of feedstocks in North America, causing Mexico to be in constant competition with the US. The proximity between these two countries requires Mexican producers to have a competitive stock in order to engage the implementation of any type of project, otherwise it is not attractive to produce in Mexico. Stock is expected to have a minimum based on new price relationships between gas and oil. Another important factor is that the Mexican domestic market is expected to grow and this will attract incoming projects. Key investment decisions will be postponed until companies can see how all these new factors work together and until prices settle in the future according to bulk feedstocks.

Q: To what extent is Etileno XXI the company’s only focus, and how far are you planning on continuing to invest in other plans and opportunities?

A: New plans depend on the feedstock availability, as we do not see any opportunities in the short term. With the drop in oil prices, all major petroleum companies like PEMEX are facing challenges and a natural readjustment of budgets because the scenario is completely different, and this is making short term investment unattractive. Other oil companies may choose to invest but they will do so in a selective manner because of the liabilities in the market. Braskem is always looking for opportunities for growth in this developing market and for potential in our relationships with companies in the industry as long as the risks are minimized with stock availability.