Decisive Role of Mid-Sized Petrochemical Producers

In the transformation currently underway in the Mexican petrochemical sector, it is important to foster the healthy growth of Mexican petrochemical producers. These companies are most familiar with Mexico’s petrochemical processing capabilities and are best equipped to deal with its notorious logistical characteristics. Their size grants them the agility and the dynamism necessary to address the relevant issues and solve the problems that stand in the way of the industry’s resurgence. Many companies fit that profile during the golden age of Mexico’s petrochemical industry in the 1960s and 1970s, but unfortunately that is no longer the case.

Grupo Petroquímico Beta (GPB) is one of these companies. Established in 2005 as a manufacturer of water-soluble cellulose ethers, it has grown into an internationally competitive business that has expanded beyond Mexico’s borders through its exporting capacity and its strategic alliances, such as that achieved with HCS Group last year. “GPB is in a unique position, since there are not too many medium-sized petrochemical companies in the world that are invoicing US$40-50 million as we do. This gives us the unique advantage that our corporate structure is much thinner. We have a turnover of around US$500,000 per employee, which is very substantial,” says Raúl Baz Harvill, CEO of GPB. “The manageable size of our corporate structure combines with our effective in-house engineering and manufacturing strategy to create a competitive option for the creation of custom petrochemical solutions. One of our advantages is that we are not geared towards high volumes of products. We are more flexible, and we adjust our volume requirements to produce smaller quantities of the specific products demanded by our clients. We also have the ability to build plants at a lower cost and faster than our competitors in the US, which provides a substantial advantage in terms of our cost structure. The petrochemical industry is capital intensive, so the more efficient you are in the use of capital, the more profitable and competitive you will be, with the corresponding possibility to confront larger corporations.”

Although GPB continues to rely on growth in the cellulose ethers market, it has diversified beyond this initial niche. It is now close to its goal of becoming a dominant supplier of refined pentanes for Mexico and Latin America. Baz Harvill lays out the circumstances that will make this possible. “We want to accomplish this goal through our association with HCS, thanks to which we will control almost all of the market. The only other supplier in Latin America is Repsol, but that situation changed after the involvement of the Argentine government. We also understand that important clients like BASF were not satisfied with them.” GPB is also becoming an important producer of carboxymethyl hydroxyethyl cellulose, or CMHEC, a chemical essential in the process of shale gas fracturing.

A major issue in the Mexican petrochemical industry is the shortage of raw materials. This deficiency limits the country’s production and processing capabilities, thus inhibiting its international competitiveness and attractiveness to private investors. This is an issue that GPB has been raising awareness of for many years and is now actively trying to solve, as Baz Harvill explains. “What we need is ethylene. Most of our colleagues agree that it would make sense to build a plant with a capacity of 200,000 to 250,000 tonnes, but ethylene has to be available. PEMEX has announced that it is going to build a plant expansion able to provide 80,000 metric tonnes of ethylene oxide annually. The new environment resulting from the Energy Reform has the potential to change how and where that investment will take place. In any event, I expect the outcome to be positive for ethylene oxide consumers.” Baz Harvill believes that the new paradigm created by the transformation of the Mexican petrochemical sector and the Energy Reform will facilitate the increase in raw material availability, which only a year ago seemed much more distant.

The company’s size also allows it to easily implement new environmental practices, processes, materials, and equipment, such as a recent switch from fuel oil to natural gas for its boilers. “We have never had a single problem with SEMARNAT and we have a perfect record on wastewater and chemical treatments. Our environmental advantage when competing with larger chemical companies is quite substantial in itself,” says Baz Harvill. “Right now, most of the petrochemical industry in Mexico is environmentally safe and sound.”