Mexico's President plans relaunch of petrochemical industry

20-Feb-08
In a bid to relaunch the nation's petrochemical industry, Mexico's President Felipe Calderon plans to revise the way state oil company Petroleos Mexicanos (Pemex) sells petrochemical feedstock. The plan is to create a mechanism which, via a licensing process, will bring closer a market price or one that is really determines long term supply prices. This will pave the path for development of 1mln tpa ethylene plant at a potential cost of US$1 bln (€680 mln). In the second phase, about US$700 mln would be invested in the downstream sector. From 2000-2006, the Vicente Fox administration also tried to encourage a massive ethylene capacity expansion plan, dubbed Project Phoenix. The scheme was aborted on refusal by the Finance Ministry to allow Pemex to charge differentiated rates for feedstock. However, in 2007 the legislature revamped Mexico's tax structure with an eye toward lowering energy costs for industrial consumers, including the petrochemical industry. When margins are good the government could charge a premium, when the market is bad the government would charge less. This will ensure sharing the wealth when times are good and the risk when times are bad.
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