Merger of 7 Pemex petrochem subsidiaries to be accomplished by year-end

23-Sep-05

Mexico's government expects to complete the merger of the 7 petrochemical subsidiaries Pemex Petroquímica (PPQ) by the end of this year. PPQ is the petrochem arm of state oil company Pemex's. This indicates a delay from the original deadline set for September 15. The government's privatization commission has asked for a six month extension of the deadline fixed at the end of 2004 to conclude the merger. Though Government officials are confident that the merger process would be complete before December 31, 2005, they prefer a six-month extension to ensure enough time. The Camargo, La Cangrejera, Cosoleacaque, Escolín, Morelos, Pajaritos and Tula petrochemicals plants, were until 1997, operated as a single entity. President Ernesto Zedillo divided the PPQ plants operations with plans to privatize them separately in 1997. Privatization plans, however did not see the light of the day, and were cancelled in 2000 because the Congress approved only a 49% private investment scheme for the petrochemicals sector, which was not attractive for private investors. This failed attempt has largely contributed to Pemex's financial problems in the petrochemicals sector as it has been shelling out extra administrative expenses instead of investing in petrochemical development. The revised US$840mn Fénix project to upgrade the La Cangrejera and Morelos complexes will be carried out once the merger is completed. The merger is expected to make Fénix more feasible by streamlining the administration of the two plants into one entity under PPQ.