Braskem Idesa, Mexico signs natgas contract, begins to receive fuel

HOUSTON (ICIS)–Braskem Idesa has signed a natural-gas contract with Mexican state utility Cenagas which has already started to provide the fuel to the joint venture’s polyethylene (PE) complex, the company said on Monday.

The contract for transport services is for 15 years although Braskem Idesa said the exact term will depend on the signing an ethane contract with state energy producer Pemex.

The two have made progress on this front with the signing of a memorandum of understanding (MoU) which Braskem Idesa also announced on Monday.

The MoU outlines terms and conditions under which Pemex and the joint venture will discuss possible amendments to the ethane supply contract, Braskem Idesa said. The discussions will also cover the development of an ethane terminal.

The current ethane contract remains valid and in force, Braskem Idesa added.

Mexico has a shortage of ethane and both Braskem Idesa and Pemex rely on imports from the US to offset any shortfall and supply their crackers with feedstock.

All of Mexico’s crackers rely on ethane. The development of a terminal would mean more ethane could be imported which would allow the crackers to run at full capacity.

The ethane contract is at the root of the dispute between Braskem Idesa and Mexican president, Andres Manuel Lopez Obrador, who is commonly known as AMLO.

AMLO claims terms of the ethane contract are too low and costing the government millions.

Braskem Idesa has defended the contract. Among other things, it said Mexico’s Energy Regulatory Commission (CRE) approved the pricing formula.

The dispute over the ethane contract led the Mexican government to allow joint venture’s natural-gas contract to expire in December. This cut off Braskem Idesa’s supply of the fuel and forced the joint venture to suspend operations at its PE complex.

The joint venture was able to partially resume operations in January.

Braskem Idesa makes ethylene and PE. It is owned by Braskem (75%) and the Mexican producer Grupo Idesa (25%).

Pemex did not immediately respond to a request for comment.

Thumbnail shows a red lid made of PE

recasts, clarifying nature of contract, paragraphs 1-2