Mexico’s petrochemicals poised to add value

Mexico

Raul Baz Harvill, managing director of Grupo Petroquímico Beta, talks to The Energy Year about the challenges facing Mexico’s petrochemicals production and the company’s strategy to develop high-end products. Grupo Petroquímico Beta operates a petrochemicals plant in Coatzacoalcos, Mexico.

Can you give us a history of ethylene oxide production in Mexico and talk about its recent dynamics?
The ethylene oxide industry in Mexico was kickstarted in the 1960s and 1970s with Pemex making large capital investments. By 2005, the industry was dominated by two major products: mono ethylene glycol and the price was set by the demand in China. The other downstream major product were amines produced by IDESA.
When China began manufacturing their own ethylene glycol and the US overbuilt their production, prices collapsed and demand decreased significantly, halting Mexico’s production of ethylene glycol.
The US began transforming their mono ethylene glycol plants into ethylene oxide ones, purifying the ethylene oxide and increasing derivatives. Today, diversification has become a must to offer a wider variety of products. Likewise, Pemex used to produce 240,000 tonnes of ethylene oxide per year, but in 2021 their rate stood at only 120,000 tonnes. In 2022, it is projected annual production will fall between 120,000 and 150,000 tonnes.
The price of ethylene oxide has now increased. In addition, the government decided to resume production at the Cangrejera petrochemicals plant, which has been halted for more than a year and is now set to begin producing ethylene oxide sometime in 2022. This will raise the supply of raw materials to a level substantially higher than the demand. If one thing is certain, the industry is changing drastically; diversification and high-end products are one path for the sector to take.

What is Mexico’s refining sector doing to overcome its present challenges?
There is a great mismatch between what Mexico’s refineries were originally built for and what they are currently being used for. As a result, utilisation rates are very low. Mexico has very light oil in regions such as Olmeca, with 39 API and 0.8% sulphur content, and the Isthmus of Tehuantepec, with 32 API and 1.3% sulphur content. Mexico’s strategy has been to use these for local refineries as facilities that run on light oil are cheaper than the ones running on heavy oil. Heavier crude from the Maya region, with 22 API and 3.3% sulphur content, can be exported to the US. They can then treat it in their heavy oil refineries and send it back.
Given the high amounts of heavy crude we produce and our dependence on the US for refined products, Pemex recently bought the remaining 50% interest in the 340,000-bpd Deer Park refinery in Houston. The added attraction of the Deer Park facility is that it can refine Mexico’s heavier crude without producing fuel oil as a byproduct. The government is also constructing a major refinery in Dos Bocas.
Both refineries will take advantage of the country’s heavy oil processing while making the nation substantially self-sufficient. The question of revamping the other six refineries in Mexico is under consideration.

What challenges do the Cangrejera and Morelos petrochemical plants face?
Our raw materials are brought by train from the Cangrejera petrochemical plant and the Morelos petrochemical complex into our facility. Morelos was built as a dual-purpose plant. Its objective was to produce refined ethylene oxide, which is 99.99% ethylene oxide and 00.1% water. However, when it comes out of the reactor, it is 90% water and 10% ethylene oxide.
It then requires the evaporation of the water, which turns a portion into mono ethylene glycol and the remainder into ethylene oxide. This means that one cannot produce more than a certain amount of refined ethylene oxide without starting to produce mono ethylene glycol. Due to market dynamics, the plant is being operated at 30% capacity, which is not its potential profitability. Moreover, it would cost Pemex USD 6 million to convert the plant into a 100% ethylene oxide plant in an environment where finances are a major constraint.
The Cangrejera plant produces ethylene oxide only. Right now, the Cangrejera plant is undergoing a major revamp, to be finished in the first quarter of this year.

What is Grupo Petroquímico Beta’s growth strategy?
Five years ago, we were processing around 5,000 tonnes of ethylene oxide per year. We closed 2021 processing at around 9,000 tonnes per year and are aiming to hit production of 18,000 tonnes in 2022. This amount will be catered 50/50 towards the local market and exports.
Our strategy is to grow. We have the advantage of being able to do this modularly by putting in new reactors and enlarging the security and control system. This year, we are aiming to connect a new 20-cubic-metre high efficiency reactor that will take us 12 months to build and install. We expect to have it up and running by the end of 2022 or beginning of 2023.
We need this expansion because as we increase and diversify our portfolio, our capacity is reduced. For example, polyethylene glycol comes in several varieties. If you are only producing one type of product, you can go from one to the next. However, when you change products, you must clean the corresponding tanks and equipment thoroughly. This takes at least a day as protocols in the market of our products are very strict, which reduces capacity.
However, we have more demand and feel the need to expand. We can easily grow by 20-30% a year if we have the raw materials. At the same time, the capital cost being the major component of the fixed cost structure, we manufacture our own reactors reducing at a very efficient cost without reducing safety. This differentiates us from other companies with high capital costs. They buy reactors from companies in the US or China, which cost substantially more than ours, which are built onsite. Our reactors cost us USD 2 million to build. Our objective is to continue growing to fulfil the demand in Mexico and export to the US.

Why is the company looking to move towards high-value products?
One of the advantages of ethylene oxide is that it can be used in its entirety. Due to this, we are moving to produce esters, which are highly specialised. We have our own laboratory, where we develop tailor-made approaches. For instance, a company that sells a product across Europe in the cement industry approached us to see if we could manufacture several thousand tonnes per year in Mexico. We manufacture products for several multinational companies, who make up our main demand in the US and Latin-America.
Our aim is to produce value-added products. Supplying high-end products means production is smaller. For example, if a company like L’Oreal is going to make a cream, they are not going to buy more than 2 tonnes every six months. This is a completely different ball game than catering
in large batches; it is more exclusive and not based on a market of scale. Management-wise, this kind of production is more difficult, but it is much more profitable. Margins are much better. We are determined to solidify our position in the specialties sector. We are now gearing towards being able to make small batches, drums of around 50 kilograms. The pharmaceuticals industry is also on our radar.

What kind of measures are taken in your laboratory to keep up with safety specifications?
In our laboratory we have 3- and 5-litre reactors, which are small. The reactors in our plant are 10 tonnes and 20 tonnes. It is easier to produce things in large reactors as they have an equal number of instruments to the small ones. There is also a big difference in the software used. In our plant, everything is automated. All software is developed by us. The software is extremely important because it ensures the quality of the product and safety of the plants.
We have a dual reactor safety system that is interrelated with its control system. If anything happens in the control system, the safety system takes over immediately. If there is a major issue, such as a rail car moving or a possible spillover, the entire plant goes into safety mode and everything stops. Furthermore, we have cameras, and our personnel are geared up for safety matters. Safety is fundamental; apart from all the normal safety stipulations, we hold a safety certification from major corporations.

What differentiates Grupo Petroquímico Beta from other petrochemical producers?
One of our added values is our excellent service. We can guarantee a much better delivery than other companies in the sector due to our logistical capabilities. Our quality and experience have allowed us to gain the confidence of major renowned multinational clients. We also make sure our team is experienced and knows all of the processes in our business. Managers must have experience in the laboratory and the head of the laboratory must have experience in plants. When we finally develop a product in the laboratory, people in the plant take command of the reactor and do everything required to transfer know-how and technology.

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