Braskem to review all investments in Venezuela

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It was obvious, but yet still, I didn´t want to see, Braskem is reconsidering all its investments in Venezuela, in order to adapt them to the new global reality.

What is this new global reality?

- The plastic consumers do not look for added value.
- The old saying: "Think global, act local" has been replaced.

In my opinion, the previous investments were already in line with today´s reality. This information, for me, is not more than a pateada de ahogado, something that simply will die, and is still trying someway to survive.

PVC in Venezuela

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Ok, I will translate one of previous entries in spanish.

The PVC or polyvinyl chloride is +30 year polymer product. In all these the process has become much safer (the monomer is a known carcinogenic compound), and their application are broader and broader. Their biggest blow was when it was forbidden to use it to contain potable water. Specifically its production in Venezuela started in 1979, and currently has an installed capacity of 190 MTA (which it expected to double by 2013).

The internal demand of PVC in Venezuela is about the 200 MTA, therefore there is little export margin. Although when those new capacity comes online, Venezuela will produce the double of its consumption and approximately an 20% of all the latinamerican market.

However, comparing the use of PVC in Venezuela, by CONAPRI figures, 80% of the production is used in piping. Comparing this percentage with other regions, apparently there is a huge margin for development. In fact, the so called "Petrocasas", are a good step.

In my opinion, more interest should be focused in producing PVC profiles and packaging.

Some thoughts about venezuelan plastic market

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As I previously said in the blog, the petrochemical business (polymers) is intrinsically linked to the end user consumption.

In order to select the best method or technology to produce any polymer, and market study has to be done to determine the trends of the consumers.

In the middle east for example, an ExxonMobil technology, which has the best cost position and high tonnage its selected.

In india, because some cultural particularities, its a batchwise process because of the numerous (over 100 I think) different grades they have to produce in a single plant.

In the Netherlands the polymers companies needs also to compete beside a cost position, to a differentiation position.

Now, How should a Venezuelan polymer producer company should behave in order to please the domestic market?

The example is the tooth-paste, I was amazed to find in Europe the toothpaste in which the cup have to be completely loosen from the tube in order to get paste out. It was different from Venezuela where everything is linked to an easy-to-open easy-to-close cup.

So the answer to the question is: similar to the US, the venezuelan consumer adopt very easily the packaging preferences of the american consumer.

Update - Braskem - Pequiven is reconsidering polyolefin plant location in Venezuela

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According to this source

Braskem intention is to relocate the PP plant from Jose petrochemical complex to Falcon. The production capacity its expected to be now 300 mta (from previous 450 mta). This reduction in the production capacity is indeed strange. I could only speculate in the reasons of it.

- Lack of propylene.
- Lack of market for high volumes of PP.
- To reduce capital expenses.

The 3bn project is still going, but IMO, somewhat delayed. The reason of the delay? Difficulties for funding and global crysis. This information was provided by Braskem CEO, so it can be trusted.

Update: the third reason appear to be the correct one, if built in Jose, an propane dehydrograntion plant is needed. In order to reduce the capital expenses, is it better to move the project to Falcon and use the FCC propylene rich streams.

PDVSA and PEQUIVEN, is it better for Venezuela to merge them?

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Pequiven historically has been part of PDVSA business, it was about 8 years ago when Pequiven was decided to be completely independent from PDVSA. After this decision was made, the 3bn projects were announced and Venezuela as a petrochemical global player was announced.

Today, as it has been discussed here, some of the projects could be suspended, and there is some rumors about Pequiven going back as a filial of PDVSA.

If we take the examples of POC (Private Oil Companies), we can find both models, TOTAL's whose petrochemicals brand is somewhat independent and ExxonMobil whose petrochemical business is totally dependant to the rest of the group.

In the NOC (National Oil Companies) examples, Saudi Arabia has everything. SABIC (partially private company) is independent from Saudi Aramco and also Saudi Aramco itself is pursuing a very ambitious petrochemical project.

In short words, no structure has emerged as the optimal and crucial one. In the blogger opinion, the petrochemical business should be separated from the Refining and extraction business, however the plants should be completely integrated and sinergy should exist between them.

The nature of the petrochemical business is intrinsically different from oil and refining business. If the decision-making for both parties is under the command of the same office, it will harm the correct development of the business.

In this way of thinking, I am not excluding close cooperation between some office of PEQUIVEN and PDVSA, but complete subordination of the first should not happen.

Venezuela, joint ventures, petrochemicals and oil.

Image: aca

After reading short gossip, Shell has said that the big oil companies are not interested anymore in doing business in Venezuela. The politic environment in the country is simply not good.

Although for an oil business is not necessarily bad news (Saudi Aramco, the NOC from Saudi Arabia is capable to develop a project equivalent to the whole venezuelan oil production), for Venezuela and specially for its petrochemical business -in my opinion- is bad news.

The political partners of Venezuela, who have developed their petrochemical business are Brazil and Iran, but they are not technology licensors, and our petrochemical projects will be "their" petrochemical projects.

Como muestra un botón: Brazil (Braskem) its reconsidering the location of the PP plant (previously planned in Jose), will be the new location in Venezuela?

Pequiven and Braskem are reconsidering the location of the PP plant

Apparently this breaking new will go into the mainstream in the next few days. More information to come...