Mexico's Fénix petrochem project in state of uncertainty

14-Jul-05

High feedstock costs and lack of investment in new technology have been creating obstacles in the growth of the Mexican plastics and petrochemicals industry, which has seen declining output in recent years. The Fénix project, due to start operations in 2009 with annual sales of some US$1.5bln, was seen as a remedy to reducing Mexico's multibillion-dollar trade deficit in petrochemicals. Mexico's state oil company Pemex's PPQ petrochemicals unit planned to partner Canada's Nova Chemical and local petrochemicals companies Grupo Idesa and Indelpro on the project. Fénix investors had been asking the government for substantial discounts on feedstock and energy costs compared to those of US competitors to counterbalance country and project risk However, local papers reported that the finance ministry had decided it would not subsidize the partners to buy raw materials for Fénix. Despite reports of cancellation, the action on part of the partners indicates that there is no change in plans of Mexico's US$2bn Fénix petrochemicals project. Studies are underway as the project continues "under analysis". Proposals to carry out the project are currently being evaluated, which include options that use different technologies allowing for the same volumes of ethylene, polyethylene and propylene. Pemex awarded its partners a contract to carry out a feasibility study for the project in October 2004 to determine the location, feedstock to be used as well as markets available for its products. The shortlisted sites for the complex are Altamira in Tamaulipas state and Coatzacoalcos in Veracruz state, which had both been offering tax breaks to attract Fénix to their respective states.