Boston, MA -- (SBWIRE) -- 11/20/2013 -- BMI's Mexico petrochemicals report examines the enormous long-term feedstock potential provided by shale gas, but warns of a risk of a contraction in output in 2013 if the US economy does not bounce back. The report looks at how leading operators are responding to the government's desire to rapidly ramp up capacities across the value chain over the next 15 years through the involvement of the private sector, notably foreign majors. It also details forthcoming projects and their contribution to ambitious long-term targets.

In 2012, Mexico's olefins capacities included 1.58mn tonnes per annum (tpa) of ethylene and 660,000tpa of propylene. These fed downstream capacities of 875,000tpa polyethylene (PE), 590,000tpa polypropylene (PP), 667,000tpa polyvinyl chloride (PVC) and 310,000tpa polystyrene (PS). It is widely recognised that these capacities are not large enough to meet domestic demand, let alone allow the country to take full advantage of its strategic position as a supplier to the US market. Mexican petrochemicals output has suffered due to the effects of the global economic downturn, despite a relatively stable domestic market. Mexico's dominant oil, gas and petrochemicals producer Pemex reported that its petrochemicals output declined 13.4% year-on-year (y-o-y) to 7.38mn tonnes in the first eight months of 2012, having fallen 6.1% y-o-y to 12.38mn tonnes in 2011.

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Mexico is aiming to raise total petrochemicals production capacity from around 9mn tpa in 2011 to 22.6mn tpa by 2026; Braskem's Ethylene XXI project will account for 15% of this increase. Reaching this goal is contingent on the full development of the country's shale gas reserves (estimated at 19,300bcm in 2012) as well as a reliable source of raw materials and greater private sector participation. Mexichem is also in the process of diversifying its revenue streams and in 2012 was in negotiations with Occidental Petroleum over building a US$1bn ethylene facility. It is also planning a JV with Pemex which will have 400,000tpa of vinyl chloride monomer (VCM) capacity.

BMI has the following forecasts/views:

- Reducing dependence on imports is only likely once the Ethylene XXI project, based on 1.05mn tpa ethylene capacity, 750,000tpa high density polyethylene (HDPE) and 300,000tpa low density polyethylene (LDPE) capacities, moves into commercial operation in 2015.
- Mexico will remain a net importer of polymers over the long-term as its burgeoning manufacturing sector requires greater amounts of plastic.
- In BMI's Americas Petrochemicals Risk/Reward Ratings (RRRs), Mexico is in fourth place with a score of 61.8 points, up 2.1 points due to an improvement in both petrochemicals market and country risk scores.

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