Grupo Idesa was founded in 1956. Could you provide an overview of the company and its focus areas today?

The company started with the production of phthalic anhydride in a small plant and after that grew through different petrochemical complexes, first in Puebla, then in Tlaxcala and the latest complex we have is in Coatzacoalcos, in southern Veracruz State. Coatzacoalcos is well located as it is near to a lot of feedstock supplies. Here we buy ethylene oxide and ammonia from Pemex and ethane for Braskem Idesa. Our sodium cyanide plant there buys natural gas, ammonia and caustic soda. In addition to the production of different chemical products, in the last 15 years, we have diversified by creating companies focused on distribution, logistics, construction systems and recently in the oil and gas exploration and production business.

What are the main drivers of the petrochemicals market in Mexico?

Access to competitive raw materials and markets are important. From Coatzacoalcos you can reach the main Mexican markets and export markets. We export products to many countries and a key advantage is Mexico’s trade agreements with over forty countries, which mean we benefit from lower duties and the absence of non-tariff barriers. For example, we have a trade agreement with Israel which has allowed us to gain 65% stake in the ethanolamines market in that country.

How successful have the Braskem Idesa Etileno XXI project and the separate project with Evonik been so far?

We have already sold 1.2 million mt/y of polyethylene since Etileno XXI became operational in April 2016. The ramp up was very smooth and the rate of operation in 2017 has been above 90%. On average we produce 80,000 mt per month and sell 50% to 60% domestically and export the rest to 43 countries. Our core focus is the domestic market and we would like to sell 80% of production to it.

The Evonik partnership is a 50-50 JV. We started operations in September 2016 and the ramp up has gone well as we are now at 80% to 90% of capacity. Sodium cyanide is an important ingredient for the mining industry as Mexico is the world’s largest silver producer and among the top ten of gold, which sodium cyanide helps extract. The market is healthy, growing from 70,000 mt/y five years ago to 130,000 mt/y in 2017.  Our capacity is 40,000 mt/y and we plan to expand it.

How affective have the energy reforms been in leading to more competitive feedstock?

The reforms were very deep. Now Mexico is in the process of implementing these reforms and the private sector is now active in upstream, midstream and downstream markets. The bidding rounds were generally very successful and several companies are already working in JVs with international partners and on studies to start producing crude oil and gas. This is positive for the petrochemical industry and in four to seven years the impact on feedstock will really be noticed. We have already been approached by a private company selling ethane for next year, which represents a situation where for the first time companies other than Pemex are supplying ethane in Mexico.

Idesa was awarded the Tecolutla field and is working in a 50-50 JV with Canadian company International Frontier Resources, who have experience in upstream which we do not. We expect to start production in the first quarter of next year. We have two main objectives in this project: in the long term to be vertically integrated, in the short to medium term to learn how to participate in upstream and take advantage of the opportunities not just to consume feedstock, but to sell it to other players.

Are Idesa’s recent investments a vote of confidence in the Mexican petrochemical industry?

If a country has good access to feedstocks and markets, the prospects are good. Mexico will have both when the energy reforms properly take effect. Although there is a lot of talk about NAFTA, the chemical industries across North America support a trade agreement. We expect some modernization of NAFTA given it was signed twenty years ago and there was no chapter on energy; including this would protect the investments of Americans and Canadians. The Mexican chemical industry is leading negotiations on rules of origin for the whole country. Although it will be complicated, we are positive about NAFTA; one thing is what is said by politicians and another thing is what is discussed at the negotiating table.

What else differentiates Idesa from other players in the market?

We focus a lot on people and talent. A company can always find technology, feedstock and the right markets, but if it does not have the right skills and innovativeness, then progress is not possible. We want our employees to feel this is the best place to work.

Where would you like to see Idesa in five years’ time?

Our new vision is to be active in upstream, midstream and downstream, so in five years’ time we will have a significant presence in all three. At present we are in the downstream market due to our petrochemical activities and in the midstream due to our logistics business. We will participate in future bidding rounds and we may work with other companies that have been awarded fields. We also plan to grow our port terminal in Veracruz to handle fuel, made possible by the reforms.