Benefits of the Mexican hydrocarbon reform

IHS has said that the recent changes made to Mexico’s hydrocarbon laws are opening doors for private oil and gas investment in the country, which in turn will enable the country to secure more competitive feedstocks that are necessary for expanded petrochemicals production in Mexico. It will also reportedly allow cheaper electricity costs in the country, which will help improve the country’s competitiveness and create opportunities for new domestic and foreign investment in the country’s manufacturing and petrochemicals industries.

Dave Witte, senior VP of IHS and general manager of IHS Chemical said, ‘the lack of investment in the Mexican oil and gas industry has also curtailed growth in the country’s petrochemical sector, which has been stagnant in terms of growth for the past 15 years. Several facilities have closed and no significant new production capacity has been installed in recent years, but we believe upcoming energy reform will bring access to much needed feedstock supplies. This, in turn, will help improve Mexico’s manufacturing competitiveness and drive demand growth downstream. We at IHS Chemical expect this will create opportunities for new domestic and foreign investment in Mexico’s petrochemical and downstream industries.’

Petrochemicals

In 2013, the petrochemical industry accounted for approximately 12% of manufacturing, according to Mexico’s National Institute of Statistics and Geography (INEGI). Last year, Mexican imports of chemicals reached US$ 24.5 billion, which represents approximately 8% of imports that were made by the manufacturing industry also according to INEGI. IHS has said that the Mexican economy and GDP, led by the manufacturing sector, will grow 4.2% next year, and will continue to be positive into 2016, with a 4.03% GDP increase expected.

Whitte said, with regards to chemical demand and production, ‘there are dramatic examples of opportunities in a number of value chains where Mexican industry could benefit from enhanced domestic chemical supply capabilities. Automotive and agriculture are two of the industries in Mexico with high growth potential, and the plastics industry is another. In the case of polyethylene, for example, in 2014, Mexico will have to import approximately 1.5 million t of this widely used plastic. This represents close to 80% of Mexican demand. However, this polyethylene supply and demand imbalance will change once the Etileno XXI project starts late next year.’

Etileno XXI is a project currently under construction by the joint venture between Braskem of Brazil and Mexican company IDESA. IHS expects construction to be completed by the end of next year, and Witte believes the project represents the first grassroots petrochemical facility built as a result of the current energy revolution reported in North America, since the site will rely on natural gas as a feedstock.

Whitte has also commented that Mexico is strategically positioned to attract investments from the US and other foreign companies seeking to access the Latin American market. ‘There are significant gaps in terms of chemical supply in Mexico, so the need is there domestically, and with the new flexibility to invest due to the changes in the legislation, we at IHS see very good opportunities for the Mexican chemical industry. The challenge for Mexico is to improve its cost competitiveness to attract the investment it needs. For Mexico to become a real petrochemicals powerhouse, the long term availability of cost competitive feedstocks will be absolutely necessary. To achieve this, Mexico will likely consider taping into its shale hydrocarbon resources as part of its feedstock strategy.’

Whitte has said that advancing the petrochemical industry must continue to be high on the list of Mexico’s top priorities. ‘There are some short term priorities, but a window of opportunity has just opened that cannot be missed.’

Edited from press release by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/30102014/benefits-mexico-hydrocarbon-reform-ihs/