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Mexichem multiplies alliances to build competitive VCM capacity

After Occidental, Mexichem signed with Pemex

In August 2012, Mexichem SAB (Mexichem) signed a Memorandum of Understanding (MOU) with Occidental Petroleum Corp. (Oxy) through its chemical branch Oxychem to build a new ethylene cracker for the supply of vinyl chloride monomer (VCM).

Vinyl Chloride Monomer is the primary feedstock for the production of the numerous products of our daily life made in Polyvinyl Chloride (PVC) such as pipes, packaging, coatings, wire insulation.

In September 2012, the board of Petroleos Mexicanos (Pemex) approved the joint venture planned with Mexichem to expand the production capacity of VCM in the Tlalnetanpla petrochemical complex, in the Veracruz Province, Mexico.

Through these partnerships, Mexichem aims at securing its long term supply of VCM and reducing its materials costs from its actual suppliers.

Mexichem emerged a key player of the chemical industry in the Americas by the acquisition of about 15 companies since 2007.

Among the most significant operations, Mexichem acquired in 2010:

 – Ineos Fluor from Ineos Holdings to become the world largest producer of fluorite and second largest of hydrofluoric acid mostly used as refrigerant gases.

 – Plastisur, a Peruvian company with a leading position in South America for the production of PVC pipes and joints.

Also in 2010, Mexichem made the decision to invest $1 billion capital expenditure in the expansion of the Tlalnetampla petrochemical complex with an option for an additional expansion in joint venture with Pemex for the specific production of VCM.

In order to secure the sourcing of the VCM feedstock, Mexichem proposed Pemex to create a joint venture where the working interests are shared according to the partners contribution:

 – Mexichem 60% is the operator

 – Pemex 40%

With Pemex’s board approval, Mexichem is able to proceed with this further Tlalnetanpla expansion to increase the production capacity from the actual 220,000 t/y to 400,000 t/y of VCM.

Pemex and Mexichem estimated the capital expenditure for the Tlalentanpla project to $200 million and should come on stream in 2014.

Mexichem and Oxychem work on new ethylene cracker

In addition to the Tlalnetanpla expansion project, Mexichem is planning to increase its global production of PVC by 50% from the actual 1 million t/y to 1.5 million t/y.

To secure the VCM  supply in the corresponding quantity, Mexichem opened discussion with Oxychem, the chemical subsidiary of the US-based Occidental Petroleum.

According to the project of joint venture between Mexichem and Oxychem, the intention is to benefit from the competitive prices of the ethane developed from the US shale gas.

Based on this competitive and abundant feedstock, Mexichem and Oxychem are working on the feasibility study of an  ethane-based ethylene cracker of 544,000 t/y capacity.

This ethylene cracker should be built at Oxychem’s Ingleside, Texas, facility.

With this expansion, Oxychem could supply up to 1 million t/y of VCM to Mexichem for its PVC production.

The feasibility study of this new ethylene cracker should be completed on mid 2013.

If successful, Oxychem and Mexichem could expect to move in following in order to complete the engineering, procurement and construction (EPC) work by 2016.

Estimated to require $1 billion capital expenditure, Mexichem and Oxychem would share 50/50 the working interests in the joint venture.

Through these two partnerships, with Pemex in Mexico and Oxychem in USA, Mexichem intends to continue to grow at the same speed and to secure its profitability in building its market leadership on a competitive and sustainable sourcing of ethane-based VCM feedstock.


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