Encouraging Mexico´s Petrochemical Development

Mexico’s downstream industry is familiar with the largest petrochemical project in the country, Etileno XXI, which was built by the Braskem Idesa partnership. “We started developing the project in 2011 and we hope operations will be running in 2016,” states José Luis Uriegas, CEO of Grupo Idesa. He adds that the group is carrying out the project in close collaboration with contractors, technologists, and experienced staff from both Grupo Idesa and Braskem in order to reach the desired quality. If everything goes according to plan, the plant should be producing near full capacity by 2016, which represents approximately 900,000 tonnes of polyethylene. “Our presence in the Mexican market will certainly have an impact on customers, as they will be able to enjoy excellent support in technical assistance, a service which is lacking locally,” Uriegas asserts.

Uriegas is aware that excellent services might not be sufficient to sustain a certain market share in the long term, and explains that Grupo Idesa also benefits from competitive pricing, as it is located in the NAFTA region, where half of the world’s polyethylene production is based. This confers the Mexican producer a unique advantage, as the final price of the product is defined by companies in North America. The fact that Mexico is one of the world’s largest oil producers also provides the company a certain advantage, as North America’s polyethylene is produced from oil, not ethane. The feedstock for Etileno XXI comes entirely from the southern part of Mexico, where the crude oil has properties that facilitate the production of associated gas, rich in ethane. “We believe that the new investment generated by the Energy Reform will raise production levels, which currently lie at 2.2 million b/d. There is already enough ethane in the region for our project and its expected levels of production, but we hope for that level to be increased in four to six years, when we may be thinking about expanding our cracker,” Uriegas comments. He also mentions that the group is looking forward to the coming phases of Round One, and particularly R1-L03, the oil from which will be available in a couple of years and will be able to fuel Grupo Idesa’s growth.

The global market is growing by approximately 1 million tonnes per year, and given this figure, Uriegas does not expect the group’s added capacity to fundamentally modify the market. “Even when the rest of the crackers in the Gulf coast come in operation in 2018-2019, adding 8-9 million tonnes of extra capacity over two years, the market will not change as it will absorb this fluctuation.”

He also adds that certain plants will shut down due to outdated processes, thus ensuring constant, uninterrupted growth. Uriegas does not expect to compete directly with PEMEX in most markets, but rather with other suppliers. Rather than delivering large volumes to only one region, Grupo Idesa prefers to distribute smaller volumes to different areas, so as to not hurt market statistics. Since market share increases gradually, the company only plans to place 60% of next year’s production in Mexico, and the rest in other parts of the world due to significant demand in places such as the US, Europe, Asia, and Latin America. “In Mexico, we already have over 300 customers, as we started with pre-marketing over three years ago, and the group of distributors that will help us with the placement of small volumes has also been selected. In addition to this, we already have certain customers outside of Mexico. These are direct customers, traders, or distributors, depending on the region,” Uriegas details. As time passes, the group will try to increase Mexico’s share of production, aiming for 70% in 2017, with the ultimate goal laying between 80-90%.

Being aware of the difficulties entailed in training and retaining skilled labor, Grupo Idesa is implementing an initiative to train some of its workers to stay in the company once the construction phase is over, and is recommending others to different large construction firms around Mexico. The construction stage had 17,000 workers at its peak period, but the number reduced to 2,000 in January 2016. “We have been informing other construction companies about the expertise and professionalism of our workers,” Uriegas reports. “Most of our workers are specialized in different stages of the construction process, and we have given them certificates to corroborate the quality of their performance when they worked with us. Our training programs focus directly on the communities where we work, as we would like to have many workers living close to the plant.” Uriegas hopes to retain about 800 people, half of which would work directly in the plant. Many of these will have been trained for one or two years in plants similar to the one built in Coatzacoalcos, giving the company a chance to undertake further projects nationally, and even outside Mexican borders.