Page 5 - LatAmOil Week 39 2021
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LatAmOil                                     COMMENTARY                                            LatAmOil

                         The joint venture did not say exactly how it had   accommodate the Mexican government.
                         dealt with the $65mn worth of fines that Pemex
                         has racked up as a result of its past failures to   Reduced tensions
                         deliver sufficient ethane to Etileno XXI. Presum-  In any event, the tensions between the joint ven-
                         ably, though, the parties have settled the matter.   ture and the government appear to have dissi-
                         BI said in its statement that the new agreements   pated somewhat.
                         served to resolve all outstanding contractual   This is not surprising, as BI has agreed to
                         disputes.                            terms that are more favourable to Pemex than
                           The signing of these deals probably comes as   they were under the original agreement. The
                         a relief to the joint venture. BI has seen its perfor-  joint venture has agreed to expect less ethane
                         mance falter as a result of Pemex’s failure to sup-  from the state-owned company (and has proba-
                         ply the anticipated volumes of ethane, and it has   bly agreed also to forego collecting the $65mn in
                         also found itself at odds with the Mexican gov-  fines mentioned above). It has also agreed to pay
                         ernment as a result of its dispute with the NOC.  market price for any surplus volumes of ethane it
                           Over the past year, BI has attracted no small   buys from the NOC before 2045.
                         amount of negative attention from Mexican   Additionally, it has agreed to move forward
                         President Andres Manuel Lopez Obrador, who   with the construction of the $400mn ethane
                         is both a champion of Pemex and a cheerleader   import terminal in Laguna de Pajaritos, with
                         for the idea that state-run companies (and not   help and support from Pemex and the Mexican   Braskem
                         private-sector entities) should dominate the   government. This project will eventually absolve   Idesa has also
                         national fuel and energy sector. The president   Pemex from having to supply any feedstock to
                         has sharply criticised the original agreement   BI, as it will be able to handle enough ethane to   agreed to move
                         between Pemex and BI, saying that the terms of   meet the needs of Etileno XXI in full.
                         the supply contract were not favourable enough   But it will also benefit Mexican interests  forward with the
                         to the NOC.                          directly. On the one hand, the joint venture has
                                                              indicated that it might eventually allow Pemex to   construction of a
                         At odds with the government          acquire a controlling minority stake in the new   $400mn ethane
                         Lopez Obrador’s displeasure appears to have   terminal. On the other hand, the project will also
                         had knock-on effects.                support an initiative favoured by Mexico’s pres-  import terminal
                           Late December, Cenagas, the state-owned   ident – namely, the creation of an infrastructure
                         operator of Mexico’s natural gas pipeline sys-  corridor across the southern part of the coun-
                         tem, halted shipments of natural gas to Etileno   try. This plan, known as the Inter-oceanic Cor-
                         XXI. BI complained about this move, describing   ridor of the Isthmus of Tehuantepec (CIIT), is
                         it as a “unilateral termination” and noting that   designed to raise Mexico’s profile by facilitating
                         Cenagas had refused its request to postpone the   trade between the Atlantic and Pacific Oceans.
                         cut-off for 48 hours so that it could prepare for   But BI may not just be working to assuage
                         the safest possible shutdown. However, its pro-  Mexico City. It may also be trying to buy itself
                         tests were to no avail; the shutdown happened   some time. After all, Lopez Obrador’s term in
                         abruptly and deprived Etileno XXI of the gas   office will come to an end in 2024, and Mexi-
                         it needed to maintain temperatures within the   co’s next president may not be as eager to take
                         proper range for deliveries of ethane.  Pemex’s side against private companies, in
                           At the time, there were some indications that   which case the joint venture might not have such
                         Cenagas had taken this step against BI in light   a difficult time negotiating a new ethane supply
                         of a separate contract dispute that had erupted   deal if it needs to do so. But if Lopez Obrador’s
                         earlier in the year. However, there has also been   successor follows a similar course, BI will be well
                         speculation that the pipeline operator went   on the way towards finishing its new terminal
                         forward with the shutdown as part of a co-or-  and securing its own supplies without help from
                         dinated effort to put more pressure on BI to   Pemex. ™

                                                                                                    (Photo: Braskem Idesa)

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