Venezuela's state petrochemicals firm Pequiven plans to sign a project development agreement (PDA) with Brazilian petrochemicals company Braskem in December to build a US$300mn polypropylene plant at Pequiven's El Tablazo industrial complex, Pequiven president Saul Ameliach told BNamericas.
"We are well advanced. In December we will sign the PDA, which will strengthen the project," Ameliach said on the sidelines of a petrochemicals industry event in Caracas.
The plant at the El Tablazo complex in oil and gas-rich Zulia state will have capacity to produce 400,000 metric tonnes a year of polypropylene and will be "the biggest in Latin America," he said.
The partners will cover about 40%, or US$120mn, of the project's total price tag 50:50, Ameliach said. The partners will seek other sources of financing for the remaining 60%.
Ameliach declined to say if the partners would acquire debt, sell bonds or seek loans from multilateral lending agencies for the financing.
"We are still working on the financial structure of the project," he said.
Pequiven signed two memorandums of understanding (MOUs) in February 2005 during an official visit by Brazil's President Luiz Inácio Lula da Silva to Caracas.
In the first MOU Pequiven agreed to undertake feasibility studies with Brazil's federal energy company Petrobras (NYSE: PBR) for the construction of a fertilizer plant in Brazil or Venezuela.
Pequiven signed the second MOU with Braskem (NYSE: BAK) to seek business opportunities that could lead to the construction of petrochemicals facilities in Venezuela.
The MOU with Braskem set a time frame of six months to conclude initial studies, Braskem CEO José Grubisich said at the time.
Braskem sees a partnership with Pequiven as part of company plans to strengthen its position as a leading petrochemicals company in Latin America and expand to other markets.
According to a previous BNamericas report, the plant would use natural gas supplied by PDVSA, which would lower the cost of raw materials compared with plants in Brazil, which mostly rely on naphtha.
In addition Braskem wants to take advantage of Venezuela's geographical location to reduce logistics expenses, since it is closer to export markets in North America, Europe and Asia.
The petrochemicals to be produced under the Braskem agreement will be exported to third party countries.
Venezuela's President Hugo Chávez has made it a crucial point of his energy policy to pursue projects that make use of Venezuela's large natural gas reserves such as petrochemicals projects, several of which are already in operation.