Braskem Idesa hits out at Mexico decision to end natgas transport

Mexican-Brazilian chemicals firm Braskem Idesa has pushed back against a decision by Mexico’s natural gas control center Cenagas to cut off services to transport natural gas supplied by Pemex to its Etileno XXI petrochemical complex in Veracruz state.

The firm, a JV between Brazilian petrochemical giant Braskem and Mexican oil and gas infrastructure manufacturer Idesa, argued in a release that the move by the regulator violated its rights and said it would take any legal steps necessary to revert the decision.

According to Braskem, the decision led to a stoppage in natural gas supplies starting on December 1, which forced the full shutdown of the plant’s operations.

The dispute comes in the context of protracted negotiations between Braskem and NOC Pemex about a contract for ethane supply signed in 2010, when the Etileno XXI plant was built. Pemex supplies both natural gas and ethane gas to Etileno XXI. The NOC has repeatedly asked to adjust the terms of its ethane supply agreement, which the government claims unduly favor Braskem.

“I was informed during today’s [Wednesday 2] morning that they [Cenagas] had notified the company [of the contract’s expiration] because the abusive [Pemex] contract signed under the tenure of [president Felipe] Calderón was not being corrected,” President Andrés Manuel López Obrador was quoted as saying by Mexican daily El Economista.

The president added that the gas transport contract with Cenagas had not been unilaterally canceled, but had instead reached its natural expiration date and the administration had refused to renew it. This would protect the government from any legal blowback, he said.

According to Braskem, supply was cut off after Cenagas informed the company it would not renew its gas transport contract with the firm, which lasted until November. Cenagas also refused to delay the stoppage by 48 hours to give the company time to wind down the plant’s operations safely.

The move has had “negative repercussions not only for us, our plant, providers and employees, but also for the hundreds of businesses that depend on our value chain, affecting the national petrochemical business and the overall economy,” Braskem Idesa said in a release.

Several observers have said that the move by Cenagas may force Braskem Idesa to renegotiate its supply contract with NOC Pemex to be able to secure renewal of the Cenagas ethane transport deal.

As BNamericas reported previously, the ethane supply contract between Braskem and Pemex stipulates the conditions for the latter to supply Etileno XXI with ethane gas for 20 years starting in 2010. The complex produces up to 750,000t/y of high-density and 300,000t/y of low-density polyethylene.

President López Obrador has publicly criticized the deal for years, describing it as unfair to Pemex and a result of corruption. The contract was awarded as part of an international tender process to build the Etileno XXI complex in which more than 30 companies participated.