MEXICO CITY—Ethylene XXI, Latin America's largest petrochemical complex, remains paralyzed almost two weeks after the Mexican government stopped natural gas supplies to the facility in Veracruz state on Dec. 1.
"We cannot speculate" on when operations will resume, a senior spokesman for plant owner Braskem Idesa SAPI said Dec. 10. "We keep trying to have an open dialogue to discuss difficulties with the authorities, but this has not happened yet."
The Brazilian-Mexican joint venture has been caught up in President Andres Manuel Lopez Obrador's crusade to tackle corruption in the country he has presided over for two years.
In August, he publicly criticized a 2010 feedstock deal between Braskem Idesa and state oil company Petroleos Mexicanos in which Pemex committed to supplying Ethylene XXI with 66,000 barrels of ethane gas a day for 20 years.
Lopez Obrador claimed the deal had cost Mexico $682.5 million, both in price subsidies awarded to Braskem Idesa and in fines paid by Pemex for defaulting on its contractual obligations. In February 2019, a senior Braskem Idesa executive told Plastics News that Mexico had a deficit of 30,000-35,000 barrels a day of ethane.
"That's a volume that would enable all crackers (in Mexico) to work at full capacity," he said.
One analyst said the government's actions appeared designed to force Braskem Idesa to renegotiate the feedstock contract, which the company said was signed in good faith.
In a statement, Braskem Idesa said it had always acted within Mexico's laws and adhered to "the most demanding international standards and practices."
"We have repeatedly expressed our willingness to discuss with the authorities the issues that are raised today in relation to the operation of Braskem Idesa and its contracts with Mexican state companies, bringing proposals for solutions," it added.
It said Mexico's state-owned National Natural Gas Control Center (Cenagas) informed it on Nov. 30 that it would not renew the Firm-Based Transportation Services Contract for the transportation of natural gas.
"It also blocked the entry of gas the following day, in breach of the Intermittent Base Contract in force and without taking into account Braskem Idesa's request to maintain 48 hours of reduced supply to stop its operations in a safe manner for people, neighbors and the environment."
Cenagas' actions "have caused the total suspension of the plant's processes," the Mexico City-based company added, "with the consequent and negative repercussions not only for us, the plant, our customers, suppliers and employees but also for the hundreds of businesses that depend on this supply chain, affecting the national petrochemical industry and the economy as a whole. The decision violates our rights including multiple legal provisions in force."
The government's suspension of natural gas supplies to the $5.2 billion complex set off alarm bells in the Mexican plastics industry. Leading independent polymer resins distributor Polímero y Materias Primas Internacionales SA de CV (Polymat), of Mexico City, said it was "deeply concerned."
"A rapid resolution is urgently required to eliminate the uncertainty and foment confidence" in Mexico's petrochemical industry, the company said.
Formed in 1988 by Managing Director Angel Ramon Oria Varela and Fernando Lopez, Polymat is one of the top five resin distributors in Mexico and represents Braskem Idesa, among others.
Analysts fear the government's actions will have what one of them referred to as a "severe impact on the company (Braskem Idesa) and polyethylene markets, both domestic and export."
Last January, Braskem Idesa reported that it had produced 3 million metric tons of polyethylene in the first three and a half years of Ethylene XXI's operations.
By substituting imports and generating exports, it had impacted the Mexican economy in the amount of $3.4 billion since its startup in mid-2016, the company said.
The facility in Nanchital on Mexico's Gulf Coast can produce up to 750,000 metric tons of high density PE and 300,000 metric tons of low density PE a year. Its ethane cracker has a capacity of 1.05 million metric tons a year.