... a successful story in Mexico

Historical effort to make a change… •

The last major investment by PEMEX in petrochemicals was the construction of production complex “Morelos” in the late 80’s, this complex has been in operation for more than 23 years.

•

Early 90´s, there were an attempt to privatize all petrochemical production complexes.

•

Early 2000´s: Project FENIX… FENIX II…… FENIX III (version light)

•

From 2008 to 2010, there was a bid process where the JV Braskem-Idesa was awarded with the supply of Ethane to build a Ethylene cracker and its derivatives.

What was Etileno XXI project? • It was the project aim to promote the production of 1 Million Tons of Ethylene and derivatives through the first Mexican private cracker in Mexico. • BRASKEM IDESA, a JV among the Brazilian BRASKEM and the Mexican IDESA was awarded with a long term Ethane supply contract. Ethane 66,000 bpd

Ethane Cracker

Ethylene 1,050 kT/a

PEMEX Gas Pet.Básica – PGPB

3 PE Plants

Gas

1050 kT/a

PEMEX Expl. Prod. - PEP 3

LDPE 300 kT/a

HDPE 350 kT/a

HDPE 400 kT/a

Who are the Joint Venture partners? 

Leading Petrochemical in Latin America



Largest producer of thermoplastic resins



in the Americas

Operational Units Projects under evaluation

5 Units in U.S.

Larger producer of polypropylene in the

Implementation Projects

2 Units in Germany 1 Project under implementation

US



28 Units in Brazil

First company in the world to launch a Polyethylene production based on renewables raw materials



Annual production capacity of 11 million tons of chemicals and

Polypropylene

Polyethylene

petrochemicals 

 

Financial Ratios: 2011 (USD Mil Millones) Revenue

$ 17.2

EBITDA

$ 1.9

Caustic Soda

PVC

Basic Inputs

Green Ethylene

Listed on stock exchanges in Brasil, NY

and Spain Shareholders: Grupo Odebrecht 53,8% Petrobras 46.2% (% del Capital Votante)

Who are the Joint Venture partners? 35 INDUSTRIAL UNITS Bahia - Brasil

Rio de Janeiro - Brasil

1 UNIB

1 UNIB

4 PE

1 PE

1 PP

1 PP

1 PVC 1 Cloro Soda

Rio Grande do Sul - Brasil 2 UNIB

Alagoas - Brasil 1 PVC

5 PE 2 PP

1 Cloro Soda

US

São Paulo - Brasil

5 PP Neal | La Porte | Marcus Hook |

2 UNIB

Freeport | Seadrift

2 PE 2 PP

Projects Industrial Prescence

Germany 2 PP Wesseling | Schkopau

Who are the Joint Venture partners?



Fifth most important Mexican Player in petrochemicals in Mexico with 56 years experience.



Annual production capacity of 350 thousand tons of products



Indicadores Financieros 2011 Revenues $ 625 (million USD) EBITDA $ 86 (million USD) Assets 4 Industrial production units 12 Distribution branches



Mexican Private Shareholders

Who are the Joint Venture partners? TIJUANA Baja California Norte

Idesa Corporativo

Idesa Petroquímica

SALTILLO Coahuila

Alveg

MONTERREY

Distribuidor

Nuevo León

QUERÉTARO

Negocios de Aplicación

Querétaro

CULIACÁN Sinaloa

Joint venture

LEÓN

GUADALAJARA Jalisco

Braskem-Idesa Joint venture

COATZACOALCOS

IRAPUATO

Veracruz

DISTRITO FEDERAL

Excellence Sea & Land Logistics Logística

Guanajuato

APIZACO VERACRUZ

Tlaxcala

PUEBLA Puebla

Veracruz

Competitiveness in the Industry

Successful factors in the Petrochemical industry:

o Access to market

o Raw Materials o Technology

o Human Talent

Competitiveness in the Industry

Successful factors in the Petrochemical industry:

o Access to market

o Raw Materials o Technology

o Human Talent

Mexico´s Economic Cycle related to the US Manufacturing in Mexico closely follows up the US industry, however since 2009 the Mexican’s economy dynamics has being doing better – Manufacturing production index is currently at levels above the existing previous to 2008 crisis, while in the US the levels are lower – Also, Mexico has not only recovered its employment levels but is currently above crisis’ levels Manufacturing Production Index (2007=100)*

Mexican exports (2007=100)*

180%

110

Química 160%

140%

100

120%

90

100%

México 80%

Estados Unidos 80 2007

2008

2009

2010

2011

60%

40%

20%

Real exchange rate in Latin America •

Mexico is the only country in Latin America which currently holds against a certain level of depreciation (After 2008 crisis) with respect to the US Dollar

•

Mexico achieved a higher grade of competitiveness due to its exchange rate, for example, higher overall benefit on logistics costs and lower differential in the unit labor costs compared with Asian countries.

•

Depreciation of the Mexican peso and the Canadian dollar have shown similar patterns, confirming that it is due to external factors rather than internal matters Exchange Rate Index (15/09/08=1)*

Exchange Rate (against US D)* 15

1.1

MX pesos per USD

Points

14

1.05

13.5 13 12.5

1

12 11.5 11 10.5 10 01/2010

0.95 Peso México Dólar Canadá 07/2010

01/2011

07/2011

0.9 01/2012

CAD dollar per USD

14.5

Global competitiveness trends •

The manufacture is changing from off-shore outsourcing to near sourcing

•

China is losing competitiveness:

•

Chinese wages have risen between 15% to 20% annually over the past decade,

•

Logistics costs have increased and

•

The Chinese yuan continues to appreciate Transportation Costs (USD)*

Dollars per hour

Shanghai to Chicago Monterrey to Chicago 22 days by sea and land 4-5 days by land (40 foot maritime (53 foot land container) container)

Unit Labor Costs (USD/ hrs)*

Free trade Agreements Mexico has: • 12 Free Trade Agreements with 44 countries (FTAs), • 28 Agreements for the Promotion and Reciprocal Protection of Investments • 9 Trade Agreements (Economic Complementation Agreements and partial scope agreements) in the framework of the Latin American Integration Association (ALADI). Commercial Map of Mexico*

Mexico USA Brasil

Freed Trade Agreements Economic Cooperation Agreement Economic Partneship Agrements (EPA)

Sum of Imports & Exports as % of GDP 58.6% 21.6% 18.5%

Polyethylene Mexican Market

EXXI Current

Total demand

Competitiveness in the Industry

Successful factors in the Petrochemical industry:

o Access to market

o Raw Materials o Technology

o Human Talent

Raw Material Competitiveness • •

Crude/Gas ratio at record high levels in 2012 It is expected that this ratio will continue in the medium term

Competitiveness of Mexican Ethylene •

•

•

The production of ethylene derivatives is based on Ethane as feedstock, which puts it in on an advantage position compared to worldwide NAPHTA based producers in other regions. The substantial increase on the supply of natural gas in North America based on the revolution of the “Shale gas” has radically modified international relative prices. Lower Natural Gas is beneficial as Raw Material as well as in operating cost

México

Etileno XXI

Competitiveness in the Industry

Successful factors in the Petrochemical industry:

o Access to market

o Raw Materials o Technology

o Human Talent

Polyethylene Technologies • PE technology is available to be licensee • Well known technologies available • The technology selection was driven by market requirements, operating costs, yields, efficiency, royalties and suppliers history HDPE LDPE Ineos - Loop Slurry Lyondell Basell - Lupotech T •High operability

•Tubular Reactor: Simple Process and operation, good operability, loweroperating pressure

•Transition Flexibility •Low CAPEX, OPEX (low power and steam consumption) and maintenance cost

•Transitions Flexibility

•Low OPEX: less energy consumption and excess of low pressure steam

•Catalysts: high performance, flexibility of products and low sensitivity to poisons •Reduced construction time

Loop HDPE Mono 400 kty 19

Loop HDPE Bimo/Inj. 350 kty

Tubular LDPE Homo 300 kty

R&D and application Center • Technological Research • Customer Support • Development of solutions and new applications • Processing Laboratory • Investigation Laboratory • physical • chemical • division • rheology • chromatography • microscopy • characterization • Granulation Laboratory

Support from Braskem´s Technology Centers: Pittsburg, USA and Triumfo, Brazil

R&D support from parent companies Mission of encouraging the creation of value, having Know-how and skills to differentiate in the chain value.

• • • • •

More than 160 MM USD in R&D assets 170 researches in Triufo, Brazil More than 200 registered patents 8 pilots plants Technology center in Pittsburgh, PA

• R&D center in Coatzacoalcos • Organic synthesis lab and analytical development • Pilot plant • Relationship with Mexican R&D centers and government agencies (CONACYT)

Competitiveness in the Industry

Successful factors in the Petrochemical industry:

o Access to market

o Raw Materials o Technology

o Human Talent

Human resources challenge • •

Initiating important recruitment stage Triple the size of organization structure in 2013 and almost double in 2014 Current staff members 113 Hiring

process forecast

687 648

393 113

1Q

2Q

3Q

2012

4Q

1Q

2Q

3Q

2013

4Q

1Q

2Q

3Q

2014

4Q

1Q

2Q

3Q

2015

4Q

Etileno XXI project highlights • Expected start operations in 2015 • Approximate fixed assets investment of 3.3 US Billions • EPC JV was created among Technip (largest worldwide EPC), ODEBRECHT and ICA FLUOR

• World class technology and scale • Favorable market conditions • Deficit PE Mexican market

• Cost competitive production • To be built in Coatzacoalcos, Veracruz

Location Customs area

Terminal for railcars

Bulk terminal terminal

PEMEX Petroquimica productions complexes

EPC staff

Equipo Internacional

Katoen Natie Antwerp

Axens Houston

Technip USA Claremont

Technip Lyon

Tecnimont Milan

Technip Roma

Terreno Nanchital

Braskem Idesa CNO/ICA Fluor Mexico DF

Technip Índia

Braskem Sao Paulo

Tecnimont Índia

1.863 people working world wide

Construction headquarters

27

Project Schedule 2010

2011

2012

2013

2014

2015

FEL 1 FEL 2

Ing. BASICA FEL3 Cierre Financiero

Project Finance

Preparación de Terreno

Ing. Procura y Construcción IPC

Actividades del IPC anticipadas

Ingeniería de Detalle Procura (Compra)

Construcción (electro mecánica y civil) Pilotes Cimentaciones

Construcción Electromecánica Tests

Arranque

28

Progress in land preparation

27 Oct 2011

08 Mar 2012

Julio 2011

Land preparation…..land is ready

Agosto 2012

30

Land preparation…..land is ready

Progreso de la Preparación del Terreno

LDPE Cracker

Logistic

Utilities

Starting piling of process areas

32

Procurement Currently Committed

130+ equipments PO’s has already been placed

Geographic Distribution

19% 20%

Equipment acquired by Plant Europa

16

10

Cracker 40

PEAD

61%

Asia América

25

PEBD 41

Utilities Bulk

Environmental activities during land preparation

• Identify, pictures, GPS Tags and removal of flora • Transfer to environmental reserve to be replanted • ID: Photos, GPS Tags 34

Environmental activities during land preparation

•Capture •Relocation to environmental reserve •Release •So far in the environmental program for Wildlife relocation, we counted a total of 422 individuals belonging to 64 species 35

…..Thank you