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Venezuela Petrochemicals Report 2011
Business Monitor International, Nov 2010, Pages: 49
Venezuela Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's petrochemicals industry.
Venezuela is set for a massive expansion of its petrochemicals production capacity, according to BMI’s latest Venezuela Petrochemicals Report. Growth in output is undermined by President Hugo Chávez’s political conflict with Colombia – the major source of gas feedstock for petrochemicals producers – and state interventionism in the sector, Chávez’s uneasy relations with his Colombian counterpart has at times led him to threaten a freeze in trading relations with Colombia over allegations that he was supporting left-wing rebels. In his announcement of the freeze of diplomatic and economic relations with Bogotá in July, Chávez stated that Colombian gas was not indispensible. In October 2009, the Colombian government said it was cutting gas supplies to Venezuela in order to meet its domestic demand. Up to 70% of feedstock for the giant El Tablazo petrochemical complex comes from a 225km Colombian natural gas pipeline. Halting trade would lead to the closure of the complex or force it to rely on expensive LPG imports.
The situation could be resolved through improving the country’s pipeline infrastructure in order to exploit its considerable gas results. There are moves to address this, the most important of which is the east-west interconnection (ICO) gas pipeline project. The ICO project is still in the early stages of development, however, and Chávez's willingness to compromise the north eastern state of Zulia's gas supplies once again demonstrates the Venezuelan president's tendency to prioritise his international agenda over domestic economic needs.
Chávez has brought the petrochemical industry under his control on behalf of the ‘public interest’. In June 2009 a loyal national assembly finalised a law that will require petrochemicals firms to sign a joint venture (JV) with state-owned Pequiven, which would take at least a 50% stake. While it will not affect many private companies already in the petrochemicals industry as most are already in partnership with the company, BMI cautions that it could deter future private investment in the sector. However, it will not affect the Complexo Petroquimico de Jose petrochemicals complex, which is the centrepiece of the development of the Venezuelan petrochemicals industry.
The US$3.52bn complex, which is being developed in Anzoategui state, is based around two separate JVs, Propilsur and Polimerica. Propilsur will be the PP facility with a projected production capacity of 450,000 tonnes per annum (tpa). Polimerica will build a natural-gas-fed ethane cracker costing US$2.6bn with production capacities of 1.3mn tpa of ethylene and 1.1mn tpa of PE. In August 2009, Brazilian firm Braskem announced it planned to delay investment in Propilsur and Poliamerica by two years to 2013 and 2014 respectively. The decision was taken due to the slump in the plastics market. Due in large part to Pequiven’s JV with Braskem, by 2014 BMI forecasts ethylene and propylene capacities of 1.9mn tpa and 850,000tpa respectively, which will feed downstream capacities of 1.61mn tpa PE, 560,000tpa PP, 230,000tpa PVC and 70,000tpa PS.
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