Construction of Mexico's First Privately Owned Ethylene Complex Hinges On Availability of Feedstock, in an Advisory by Industrialinfo.com.

Business/Energy Editors

HOUSTON--(BUSINESS WIRE)--Nov. 26, 2001

Researched by Industrialinfo.com (Industrial Information Resources, Inc; Houston). Corporacion Grupo Serbo (Mexico City) first announced its intent to construct an estimated $3 billion ethylene and derivatives complex in Altamira, Tamaulipas earlier this year. Serbo's owner, Sergio Bolanos Quesada, seeking partners to round out his 20% interest in the complex, made the announcement shortly after it was revealed that Serbo was purchasing the beleaguered engineering and construction firm, Bufete Industrial (Mexico City). From the start, Serbo understood that Petroleos Mexicanos (Pemex), the state run oil and gas monopoly, would provide 71,000 barrels per day of naphtha feedstock for the proposed 975,000 metric ton per year ethylene cracker.

Pemex has been slow to sign the 25-year contract sought by Serbo for the complex it hopes to complete by late 2005. A need to insure feedstock supply could possibly delay the anticipated early 2002 groundbreaking of the 10-unit complex, which will include propylene, butadiene, polypropylene and other downstream products, as well as its own cogeneration unit for electricity and steam. Serbo also has plans to construct a "city" adjoining the complex, featuring homes, schools, churches, and hospitals, among many other features over and above those found in more traditional "company towns."

Serbo and its partners hope to sell 95% of the complex's output on the domestic market, with an estimated 50% going to other petrochemical companies in Altamira. The heavily industrialized Altamira is home to plants owned by BASF, Shell, and other chemical majors. Serbo would have to import its naphtha feedstock if Pemex fails to comply with their preliminary agreement, as other naphtha sources are simply not available domestically.

"With this stall, Pemex is hurting itself and quite possibly the future of additional private petrochemical investment in Mexico," according to Annette Kreuger, chemical industry specialist with Industrialinfo.com. "With Mexico's President Vicente Fox making recent speeches that private investment is the hope for Mexico's petrochemical future, it doesn't bode well when a state run company is dragging its feet over its part in a $3 billion investment -- an investment that not only increases Mexico's protection against an anticipated surge in foreign petrochemical imports over the next few years but also offers an increased quality of life for an estimated 2,700 future employees."

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