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Chile Petrochemicals Report 2012
Business Monitor International, Oct 2011, Pages: 47
Chile’s lack of access to upstream resources will mean it will remain a marginal player in terms of petrochemicals production, according to BMI’s latest Chile Petrochemicals Report. Yet the strength of its manufacturing base should make it a reliable market for polymers consumption, although in regional terms it is still a relatively small market. Principle growth industries include packaging, particularly for its export-driven food industry.
The petrochemicals outlook has been clouded by the inability of Argentina to deliver contractual gas supplies and forcing the country to rely on liquefied natural gas (LNG) imports while it develops gasfields in the south. The ability of Chile to revive its petrochemicals industry will depend on overcoming upstream supply constraints. There should be an upturn in gas consumption as LNG volumes flow into the country and, longer term, fresh pipeline deliveries are secured. Gas should therefore continue to be the fastest-growing energy source, with consumption rising by more than 5% a year. Talks to establish a regional gas supply grid that might transport volumes from Peru's Camisea project to Chile, Argentina and others have failed to make much progress. There is a suggestion that disagreement over maritime territories and borders may stand in the way of a gas deal between Peru and Chile.
In the long term, Chilean LNG imports will exceed domestic demand projections, allowing the opportunity for re-exports or the development of downstream petrochemicals activities. The domestic market is not large enough to sustain world-scale petrochemicals facilities and would be reliant on export markets, putting Chilean industry in competition with new capacity in the Middle East, which has significant advantages in feedstock.
The shortfall in gas feedstock has been particularly problematic for the petrochemicals industry at times of high energy demand during the winter months. It is estimated that methanol output in 2011 was less than 1mn tonnes and as low as 600,000 tonnes based on low capacity utilisation rates, which were well below total operating capacity of 3.84mn tonnes per annum (tpa). The indication that Methanex could move one of four methanol plants from Chile to the US by end-2014 shows that the problem is harming the longterm future of Chilean petrochemicals production.
Energy shortages also plague polymer production. A lack of propylene feedstock has meant that Petroquim has failed to produce near the 150,000tpa capacity at its PP plant. As such, BMI forecasts that capacities will not be increased through to 2016, with ethylene capacity at 60,000tpa, propylene at 100,000tpa, PE at 46,000tpa and PP at 150,000tpa.
Problems in securing adequate domestic gas supplies to operate Methanex’s Chilean methanol complex and limited refining capacity mean it is unlikely that Chile will see any increase in petrochemicals capacity over the medium term. ENAP had announced plans in 2006 for significant developments, launching a study into units in Talcahuano including a 550,000tpa ethylene cracker, 275,000tpa propylene and 400,000tpa LLDPE to come onstream by 2011. Little has been heard of the plans since Argentina cut gas supplies to Chile.
In BMI’s Latin America Petrochemicals Business Environment Rankings, Chile sits in seventh place, 3.7 points behind Venezuela and 1.3 points ahead of Colombia. Its main strengths are its market strength, but in terms of industrial activities it remains a marginal player and its position is unlikely to improve while there is a lack of feedstock capacity.
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