Opportunities for Mid-Sized Petrochemical Companies
Home > Oil & Gas > Analysis

Opportunities for Mid-Sized Petrochemical Companies

Share it!
Tue, 01/22/2013 - 16:35

Over the years, the market for mid-sized petrochemical companies in Mexico has evolved from being a closed and domestically-focused industry to a highly competitive and open market servicing both Pemex and private companies in Mexico and abroad. This has led to both increased competition and increased opportunities for mid-sized companies with a focus on quality. One such company, Grupo Petroquímica Beta, began operations in Mexico around six years ago and claims to have the latest technology in terms of its control systems, safety systems, and strong environmental philosophy, and which, in the words of CEO Raúl Baz Harvill, is as safe as or safer than large international petrochemical companies such as BASF or Dow Chemicals.

In the 1960s and 1970s the petrochemical industry in Mexico was highly regarded because it represented a complex new business and an industry with the potential to further develop the Mexican economy. “This, combined with a 20% subsidy on the price of petrochemical feedstock, led to a boom of mid-sized Mexican petrochemical companies. They were making a lot of money, until the market was opened to international companies in the 1980s and the subsidy was abolished,” says Baz Harvill. “This development drove companies to lower their environmental and safety standards, which culminated in the founding of a strong green movement that demanded the creation of new rules and regulations to protect workers and the environment. The pressure for stricter regulation forced companies to invest in safety and environmental procedures that weakened the bottom line of the Mexican petrochemical industry, and just stopped short of destroying the private Mexican petrochemical industry.” The opening of the market to international competition changed the way in which mid-sized Mexican petrochemical companies compete in the international market. Grupo Petroquímica Beta is one example of a Mexican company that was able to grow and successfully build a competitive international business by capitalizing on an opportunity to purchase the assets of a company that belonged to the previous generation of Mexican petrochemical companies, which had been forced out of business following the liberalization of the market. Grupo Petroquímica Beta focused on one specific niche: ethylene oxide and propylene oxide.

It took Grupo Petroquímica Beta six years to both become a competitive petrochemical company in the Mexican market and expand into Latin America, where it will soon dominate the market for refined pentanes, according to Baz Harvill. “The success behind the growth of our company stems from our ability to produce all reactors and machinery, from conceptual and basic engineering to the little nitty gritty things that go into the production,” says Baz Harvill. “This in-house engineering has allowed us to save millions of dollars on reactor construction, based on our ability to produce reactors in six months for US$25-30 million dollars, compared to our competitors that spend US$120 million over one and a half years. Our competitive advantage, besides operating in line with the highest safety and environmental standards, is our efficiency in building reactors that provide us with the financial edge, through a competitive pricing model that makes Grupo Petroquímica Beta a successful exporter,” explains Baz Harvill.

The future of the Mexican petrochemical industry looks promising, but according to the CEO of Grupo Petroquímica there is still vast room for improvement. “Without a doubt, the first thing that needs to change is the availability of raw materials, especially ethylene oxide,” Baz Harvill says. “Currently, Grupo Petroquímica Beta has a quota of 7,000 tonnes of ethylene oxide per year from Pemex, and Pemex must increase the production of this chemical so that production in the petrochemical industry can increase as well. There are plans to expand Pemex’s ethylene oxide production capacity by 80,000 tonnes per year, but Pemex has not yet started this project and will not be ready to do so until 2015 or 2016.”

In order to make the business more competitive and fair, Baz Harvill would like his competitors to implement the same safety and environmental standards that his company upholds, which include policies and procedures regarding the transportation of ethylene oxide and illegal dumping practices. “Mexico tends to be a petrochemical paradise for international companies that dump their excess production in Mexico. If this does not change, our environment will su†er severe consequences. The lack of environmental law enforcement by the federal government plays an important role in this problem.” Even though Baz Harvill is not in favor of raising tari†s, as the Brazilian government has done, he strongly believes that in order to be more competitive Pemex needs to protect its domestic industry by giving Mexican companies the necessary tools to compete with international companies.” The solution, in the eyes of Baz Harvill, “is to create rules for a fair game and find a balance that leaves us neither too open or too closed.”

You May Like

Most popular