Boston, MA -- (ReleaseWire) -- 01/01/2013 -- BMI's Argentina Petrochemicals Report examines recent production and market trends in the industry and assesses how the slowdown in economic activity will affect growth in the medium-term. The report also assesses the impact of the nationalisation of YPF, the country's leading oil and gas producer, on prospects for the petrochemicals industry.
Fortunately for Argentina, the country's gas prospects have risen substantially as a result of rising investment in the country's Neuquen shale gas play. However, the nationalisation of YPF and the revocation of some concessions will complicate the government's hopes of exploiting shale reserves, which are estimated to be the third largest in the world. These gas resources could transform the fortunes of the Argentine petrochemicals industry, although shale gas production is at least several years away and therefore Argentina will remain import-dependent in the short term.
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Whether the gas reserves can support extension of cracker facilities is a different matter. BMI is doubtful that the government would wish to devote domestic shale resources to a world scale cracker, at least at competitive prices. As such, we do not envisage any olefins or polyolefins output beyond existing capacities, including Dow Chemical's 700,000tpa ethylene plants and 600,000tpa high density polyethylene (HDPE), low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) facilities in Bahia Blanca. Nevertheless, stable year-round ethane feedstock supplies should limit the country's imports of petrochemicals and support the investment environment in downstream industries.
BMI has revised the following forecasts/views:
- In the current economic context, we see no upside in 2013. While the expected depreciation of the Argentine peso will lend some support to petrochemical exports, this would exacerbate already weak domestic sales as it would fuel inflation and put real incomes under pressure at a time of rising unemployment. As such, BMI believes that in 2013 the Argentine petrochemicals industry could see a contraction on a par with 2009.
- Apart from TFEQ's planned 547,000tpa ammonia plant at Tierra del Fuego, which has stalled, BMI does not expect any new capacity additions over the forecast period due to the country's natural gas shortages and a relatively unfavourable investment climate. Investment will remain subdued until producers can secure their feedstock supplies in the long run.
- Argentina's Risk/ Reward Rating has declined 1.4 points since 2012 to 49.0 points, but retains its 5th place in BMI's regional ranking, 3.9 points ahead of Chile and 12.8 points behind Mexico. The nationalisation of YPF and the revocation of oil and gas field concession licences have severely undermined Argentina's rating.
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