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Analysis

Etileno XXI: The New Downstream Giant

Wed, 01/22/2014 - 14:17

In 2010, the joint venture known as Braskem-Idesa won a tender from PEMEX Gas and Basic Petrochemicals (PGBP) to build the largest petrochemical complex in the Americas, Etileno XXI. Under this 20 year agreement, PEMEX will supply Braskem-Idesa with 66,000 barrels of ethane per day for the cracker, which Braskem and Grupo Idesa will build and operate. This represents the largest investment in Mexico’s petrochemical sector in two decades and was entrusted to the partnership formed by Brazilian firm Braskem, the largest producer of thermoplastics in the Americas, and Mexico’s Grupo Idesa. Braskem holds a 75% share in the venture, but while Grupo Idesa only holds 25%, it brings its petrochemical technology, environmental and safety policies, and efficient processes to the mix. Etileno XXI will be located in Nanchital, near Coatzacoalcos in Veracruz. The project is located around 600km away from Mexico City and consists of a cracker with an annual capacity of 1.05 million tonnes of ethylene integrated to three polymerization units intended to produce 750,000 annual tonnes of high density polyethylene (PEAD) and 300,000 tonnes of low density polyethylene (PEBD). Braskem-Idesa selected Technip as a contractor for the frontend engineering design of the plants. Having built close to 50% of the world’s crackers, Technip makes use of the most advanced technology to transform ethane into ethylene. An EPC joint venture was then formed between Technip, ICA Fluor, and Odebrecht, Braskem’s parent company, to manage all construction-related operations for the plant. Swiss-based Ineos also signed up to provide the technology needed to transform ethylene into polymers. Once Etileno XXI starts producing at its full potential within five years, it will produce 1.05 million tonnes of ethylene and polyethylene annually for use in transformation, commercial, and industrial processes, which will replace current imports that amount to US$2 billion annually Robert Bischoff, President of the Braskem-Idesa joint venture, met with state authorities and sugar cane producers in 2010 to analyze the region’s ethanol production potential and estimate the amount of land needed to build the complex. After this analysis, Etileno XXI’s construction was designed to follow sustainability guidelines and avoided causing damage to surrounding towns. The National Association of the Chemical Industry (ANIQ) has assessed the complex’s environmental impact, and found that it would occupy a piece of land large enough for green areas to be developed and to maintain a buffer zone, preventing urban sprawl from reaching the immediate vicinity of the plant for at least 20 years. The project’s proximity to Coatzacoalcos is essential since much of the plant’s equipment is being manufactured in Europe and Asia, before entering Mexico through the city’s port. However, a lot of equipment, such as a C2 splinter measuring 97m long and weighing 900 tonnes, stayed in the docks until March 2014 as there was no means to transport it to its final destination. The government of Veracruz and the Ministry of Communications and Transport (SCT) planned to invest US$11.5 million in creating roads for the transportation needs of Etileno XXI as well as repairing the Coatzacoalcos I Bridge and the local railway system. Once these are in place, Etileno XXI will be able to draw full advantage of being nearby the Port of Coatzacoalcos, given that Braskem-Idesa is planning to sell 30 to 40% of Etileno XXI’s production abroad.

Etileno XXI requires a significant CAPEX of US$3.2 billion. The funds were secured in their totality in December 2012 from seven official agencies, two multilateral organisms, three development banks, and ten commercial banks. This hybrid loan became the biggest financial transaction in the Latin American petrochemical sector to date. The first phase of the project was set in motion during October 2011, consisting of preparing the land and starting with basic construction works. The second stage involved detailed engineering, equipment acquisition, and civil works, with electro-mechanical construction following shortly afterwards. The basic engineering works alone involved 600 staff across four countries with an investment capital of US$140 million. The construction phase, according to Braskem-Idesa, will employ between 8,000 and 10,000 people. Once the complex is finished and begins operations, currently scheduled for July 2015, it is estimated that it will create 800 direct job positions and 2,200 indirect ones. To ready for this, Braskem is sending Mexican talent to Brazil where they will train to become the future operators of Etileno XXI. Given the stagnation of the Mexican downstream segment, particularly in the petrochemical sector, there is more than enough talent to fill Etileno XXI’s vacancies. Currently, job positions within petrochemical plants are filled with experienced operators and given the slow growth of the sector, those jobs were highly sought after. This prevented the industry from having a healthy human resource cycle and hampered the development of Mexican professionals. The Brazilian petrochemical expert has taken advantage of this situation, by bringing some of those young prospects to its facilities in Porto Alegre to train them in preparation for operating Etileno XXI. A US$10 million investment was earmarked to get the Mexican staff that will operate Etileno XXI up-to-date with Braskem’s international standards. From a recruitment process that screened around 2,000 engineers, 150 promising young professionals were selected. So far, the company has taken 70 of these to its plants in Brazil for a training process that will also contain a simulation period that will take place in Brazil, Belgium, and France.

The project is expected to impact Mexico’s trade balance by significantly reducing the need for polyethylene imports, as well as serving as an economic boost through the jobs it will generate. Bischoff believes this effort marks the beginning of further endeavors by the private sector to invest in the country’s wide variety of downstream opportunities. “Mexico is a net importer of most petrochemical products and is very competitive within the manufacturing industry,” he explains. “Etileno XXI is just one example of the several investment opportunities that the Energy Reform and other constitutional amendments have generated in the petrochemical segment. Private companies such as ours, as well as PEMEX, will continue to develop this industry.”