Jose Luis Uriegas
CEO
Grupo Idesa
/
Insight

Etileno XXI a Stepping Stone for Ambitious Grupo Idesa

Wed, 01/22/2014 - 13:51

Seven years ago Grupo Idesa took the decision to expand its distribution business in order to meet the growing demand for petrochemical products in the Mexican market based on imported products. Since then Alveg, the fully owned distribution arm of Grupo Idesa, has become the largest chemical product distributor in Mexico. “The distribution business will continue to remain a core component of our long-term strategy for Mexico, even if we have identified future opportunities to produce petrochemicals,” explains Jose Luis Uriegas, CEO of Grupo Idesa. When asked about the possibility of entering similar projects to Etileno XXI in the future, Uriegas was cautious. “While Etileno XXI has been a driver of economic growth, PEMEX’s production has declined over the past decade. As a result PEMEX cannot commit to long-term feedstock agreements as long as the company is unable to increase the production level of hydrocarbons. This is why the Energy Reform will be so important. If PEMEX, perhaps with support from the private sector, can replicate the agreement reached with Etileno XXI to guaranteeing a certain volume of feedstock on clear terms and on a long-term basis, there will be good opportunities for further production of petrochemical products in Mexico,” he concludes.

Uriegas says that it was very clear from the start of the bidding process in 2008 that the Etileno XXI project was too large for Grupo Idesa to undertake on its own. Discussions with Braskem were positive from the start, as Grupo Idesa offered the advantage of working with a well-established local partner that understands the peculiarities of sector. “For us, the project represented the first million tonne production of polyethylene. Braskem has the skills and experience in polymer production, so it was, and continues to be, a very good fit. After four years of collaboration, the chemistry between the companies is better than ever. We also share very similar corporate philosophies, which contributes greatly to reinforcing our ties.”

Finding, training, and retaining the right talent has been one of the challenges faced in delivering this project on time. “There are already close to 8,000 people working on the sight, and at its peak there will be around 12,000 workers involved. The largest piece of equipment, a 91m long and 9m wide splinter distillation column, has already been successfully transported from the port and installed on site, located some 9km away. Bearing in mind that the roads in the region are not built for transporting equipment of this magnitude, this was a great feat. The engineering phase is close to completion, and great progress has been made in the procurement phase. The project has now reached the critical stage of delivery of equipment from Japan, China, India, the US, Mexico, and Europe. Ensuring that productivity is at its highest when you have 10,000 people working on site is another obstacle that we face. The financing challenges have been successfully overcome. So far, we are on schedule.” On the technology side, the cracker that Technip is building for the installation will be one of the most efficient in the world. Ineos will be providing state of the art technology for the transformation of ethylene into polymers and Braskem’s added value will be its expertise in operating all these assets.

Uriegas estimates that there are over 1,000 potential customers in Mexico for polyethylene, Etileno XXI’s final product, ranging from small companies producing plastic bags to multinationals such as Danone. He says that the project is currently in the pre-marketing stage, which means that contacts are being established with prospective clients. “We are targeting a number of relevant customers rather than focusing on volumes. In the six months leading up to the go-live date, which is July 2015, we will increase our books with additional volumes, and our aim is to achieve a significant presence with targeted customers. We are building a huge technical support area so that our customers will notice that we are providing a full range of services rather than just selling a product, which should encourage them to do business with us.” Uriegas believes that some applications are not developed in Mexico right now because there is no technical support available, and Etileno XXI aims to change that. He fully anticipates selling most of the production capacity of 1 million tonnes to the local market. “I think that we will have a direct positive impact on the sector that is transforming plastic into a final product.”

The successful cooperation between Grupo Idesa and Braskem encourages Uriegas to explore further opportunities for collaboration with Braskem, either in Mexico or the US, depending on the availability of the raw materials. “Over the past four years, the joint venture has successfully overcome some complex challenges, which bodes well for the future,” he says. “As for Grupo Idesa, we will continue to be committed to investing in the Mexican petrochemicals sector. We expect the Energy Reform to give us access to more hydrocarbons. We have the market, the technology and the talent. The missing ingredient is feedstock.”