Mexico petchem privatization finally at hand?

Mexico may finally be about to get off high center on privatization of its secondary (intermediate) petrochemicals sector.

Mexican state oil company Petroleos Mexicanos last week disclosed terms of the sale of a 49% stake in its petrochemical plant at Morelos, the first of seven plants in which it hopes to sell a minority share. Prospective bidders are required to register with the Energy Secretariat no later than Oct. 26, and the bidding results will be announced Feb. 19, 1999. Any bid group is allowed only a minority foreign participation.

The winning bidder will be required to invest $49 million to upgrade the plant, while Pemex has committed to investing another $51 million of the money it obtains from the share sale. The winner is required to maintain its investment for at least 3 years, at which time it may choose to sell its stake to a third party.

The investment is intended to upgrade the plant's cracker and to convert the existing polypropylene unit to a swing unit for producing high-density linear polyethylene and high-density polypropylene.

Another $50 million Pemex gets from the sale will be used to pay for a recently created pension fund for the plant's 3,228 workers, of which 85% are unionized.

Morelos complex

The Morelos complex, the newest of Pemex's petrochemical plants, started up in 1994. Located in Veracruz state, Morelos is just outside the heavily industrialized city of Coatzocoalcos, near two other petrochemical plants and a major refinery.

The complex comprises eight plants, including those for producing ethylene, ethylene oxide, ethylene glycols, propylene, high-density polypropylene, acetaldehyde, and acrylonitrile. In 1997, the plant produced 1.786 million metric tons of petrochemical products.

The planned "capitalization" of the petrochemical plants has been a continuing saga in Mexico over the past several years, with many political forces-particularly the Pemex labor union-opposed to any sale (OGJ, Oct. 16, 1996, p. 19). The current scheme, in which the government retains majority control of the plant, is viewed skeptically by industry observers who say that private companies are not likely to take a minority stake in a plant that needs at least $335 million in expansions and upgrades. The government is believed to want to sell Morelos and the other six secondary petrochemical plants in their entirety, but it is unable to because of political considerations. Energy Secretariat officials have said that, if no acceptable bids are received for the Morelos plant, it will ask Congress to redraw the current law, which limits the government to selling only a minority share. Mexican firms Grupo Celanese SA, Grupo Idesa SA de CV, and Polioles SA de CV are said to be interested in participating in the bidding process.