Braskem plays down concerns about Pemex ethane supply for Etileno XXI

Brazilian petrochemical company Braskem has played down concerns that Mexican state-owned oil and gas giant Pemex is looking to cancel an ethane contract to supply the firm’s US$5.2bn Etileno XXI petrochemical complex.

Braskem said in a statement the complex in Veracruz state is still operational and it has no information to believe the supply from the Mexican NOC would change.

Last week, President Andrés Manuel López Obrador (AMLO) said he instructed Pemex CEO Octavio Romero Oropeza to unilaterally cancel the contract after the company failed to reach a renegotiated agreement. However, according to Braskem, talks with the state-owned firm are still ongoing.

“Braskem Idesa [the JV with Mexico’s Idesa] maintains its commitment to seek and find constructive solutions that would allow our production plant to continue to generate quality jobs in the country,” the Brazilian firm said. “Everyone’s interests, including our clients, suppliers and creditors, as well as the important investment Braskem put into this project, should be respected.” 

The company said it had suggested several possible solutions to the problem, which stems from a lack of sufficient ethane production in Mexico.

Pemex and Braskem have reportedly been renegotiating terms of the contract, which the former has supposedly failed to comply with for months. Braskem previously said it is willing to invest in an ethane import terminal if necessary.

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

AMLO 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.

Braskem’s parent company Odebrecht was the epicenter of corruption investigations during Brazil’s Lava Jato scandal, which included probes into bribes allegedly paid to Pemex executives for the awarding of tenders to build several refineries, starting in 2014.

Experts have warned that a decision to unilaterally end the contract could have significant costs for the overburdened Pemex, as the company may need to pay fines, buy a third-party’s ethane to cover the missing supply or even be contractually forced to purchase the complex, with potential costs as high as US$4.5bn.