Boston, MA -- (SBWIRE) -- 02/15/2013 -- BMI's Chile Petrochemicals Report examines the challenges facing the industry, including the impact of low-cost imports, the tough regional export market and the shortfall in gas feedstock. The report assesses how falling gas supplies are influencing recent developments in the methanol sector.

We estimate that methanol output in 2012 was around 500,000 tonnes - based on Methanex's statement that just one of four plants is in operation at just 50% capacity. This compares to Methanex's total operating capacity of 3.84mn tonnes per annum (tpa) in Chile. Methanex's plans to move one of four methanol plants from Chile to the US by end-2014, with indications of a second moving abroad, demonstrates the corrosive effects of low levels of competitively priced gas supplies on Chilean petrochemicals production.

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Chile's ability to revive its petrochemicals industry will depend on overcoming upstream supply constraints. At present, Chilean ethylene production is reliant on naphtha, provided by local refineries. Naphtha represents 76% of the country's feedstock slate with 16% drawn from butane and 8% from ethane. Opportunities for expansion remain sparse. Refining capacity at the end of 2011 stood at 226,800b/d. Chile had planned to increase the total to 300,000b/d by the end of 2008 under a significant state-backed upgrading and expansion programme; however, owing to project delays, this deadline was pushed back.

Energy shortages plague polymer production. A lack of propylene feedstock has meant that Petroquim has failed to produce near the 150,000tpa capacity at its polypropylene (PP) plant. As such, BMI forecasts that capacities will not be increased over the forecast period, with ethylene capacity at 60,000tpa, propylene at 100,000tpa, polyethylene (PE) at 46,000tpa and PP at 150,000tpa.

BMI has revised the following forecasts/views:

- Chilean producers are also facing increased competition as a result of free trade agreements (FTAs), with US producers managing to increase their market share in recent years. Polymer production has never been sufficient to satisfy local demand and this pattern will continue over the forecast period - with imports becoming increasingly important to the Chilean market.
- Chile has low levels of hydrocarbons reserves. Oil reserves of 150mn bbl in 2012 are set to decline to 135mn bbl by 2016, with domestic supply falling from an estimated 9,230 barrels per day (b/d) in 2011 to 5,000b/d in 2016. The gas outlook has been clouded by Argentina's inability to deliver contracted supplies. As such, the Chilean petrochemicals industry will remain a marginal, local player that will struggle to compete on the domestic market.

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