ARGENTINE PETROCHEMICAL BOOM TO CONTINUE

Argentina's petrochemical industry will undergo a dramatic transformation the next 5 years. It will be shaped by the forces of privatization and deregulation currently sweeping the country, says Luis Prol, Energy Ministry undersecretary for fuels, in an interview with Oil & Gas Journal. That means deregulated prices, an end to monopolies, and increased foreign investment, following policies of President Carlos Saul Menem that also have boosted foreign investment in the country's

April 15, 1991

4 min read

Argentina's petrochemical industry will undergo a dramatic transformation the next 5 years.

It will be shaped by the forces of privatization and deregulation currently sweeping the country, says Luis Prol, Energy Ministry undersecretary for fuels, in an interview with Oil & Gas Journal. That means deregulated prices, an end to monopolies, and increased foreign investment, following policies of President Carlos Saul Menem that also have boosted foreign investment in the country's upstream sector (OGJ, Jan. 14, p. 51).

Resulting expected growth will be substantial.

Government studies have identified more than $3 billion in likely outlays to increase capacity of Argentina's petrochemical sector in the 1990s, in addition to the $450 million investments in projects under way. That will boost the value of Argentina's petrochemical exports by another $1 billion/year from about $400-500 million/year in 1988-1989.

Argentina's domestic petrochemical market currently accounts for $800 million in sales.

PETROCHEMICAL GROWTH

Prol sees political and economic change in Argentina fostering continued strong growth in Argentina's petrochemical sector.

"Briefly, we are convinced that the petrochemical industry in Argentina will experience a major transformation in the next 5 years," he said. "The country will offer abundant, reliable raw material supplied at international prices, (as well as) multiple private suppliers and transportation opportunities.

"We are confident that those aspects, together with clear and stable rules, are the adequate framework to assure rapid, sustained growth."

Prol noted multinational companies in the last 2 years showed renewed interest in investing in Argentina's petrochemical sector, mostly through joint ventures with domestic companies.

Joint venture projects involving foreign multinationals generally involve production of commodity petrochemicals for export.

Prol cited a 100,000 metric ton/year polypropylene plant being built at Ensenada, Buenos Aires state, by a combine of Royal Dutch/Shell Group, Garovaglio, and Zorraquin.

Another project fitting that description is a 636 MMcfd gas processing plant and olefins/polyolefins complex planned by a combine of Dow Chemical Co. and Cia. Naviera Perez Companc at Neuquen in western Argentina.

Perhaps the biggest incentive for foreign investment in Argentine petrochemical projects has been the elimination of heavy government subsidies, particularly for projects sited outside the Buenos Aires area, Prol contends.

"The decision to align internal raw material prices with international values will attract local and foreign potential investors that can make long term plans and have the necessary information to better protect their interests.

"The government, by setting clear and stable rules, will contribute to generating suitable growth conditions. Private investors will be able to sign long term purchasing agreements and assume commercial commitments with local and international markets."

INDUSTRY SCOPE

Argentina's petrochemical industry covers 50 companies operating 120 plants with a combined installed capacity of 3.2 million metric tons/year.

Companies owned in part by the state operate two of Argentina's three major petrochemical complexes:

Bahia Blanca, Buenos Aires province. Capacity is 201,000 tons/year of ethylene and derivatives from ethane. Operated by 51% state owned Petroquimica Bahia Blanca SAIC. Plans call for installation of a 200,000 ton/year ethylene plant by yearend 1992.
Ensenada, Buenos Aires province. Capacities are 250,000 tons/year of aromatics, 120,000 tons/year of benzene, 80,000 tons/year of cyclohexane, 25,000 tons/year of orthoxylene, 40,000 tons/year of paraxylene, 120,000 tons/year of toluene, and 10,000 tons/year of xylene from naphtha.
Operated by 100% state owned Petroquimica General Mosconi.
San Lorenzo (San Martin), Santa Fe province. Capacities are 150,000 tons/year of aromatics, 33,000 tons/year of butadiene, 65,000 tons/year ethylbenzene, 23,000 tons/year of ethylene, 80,000 tons/year of styrene, and 54,000 tons/year of styrene butadiene rubber from propane, butane, and naphtha. Operated by Petroquimica Argentina SA (PASA), a private joint venture of Anglo American Group, Perez Companc, and Uniroyal Chemical Inc. PASA is spending $120 million to expand most capacities at the complex (OGJ, Aug. 20, 1990, p. 38).

Prol believes implementation of other projects at Neuquen and in Mendoza province will make those areas key petrochemical producers as well.