Boston, MA -- (ReleaseWire) -- 12/31/2013 -- The Chilean petrochemicals industry will remain a marginal, local player that will struggle to compete on the domestic market, according to BMI's Chile Petrochemicals Report. With feedstock restraints undermining production and investment, the Chilean market will be import-dependent over the medium-term although growth will be unimpressive. The shortfall in gas feedstock has been particularly problematic for the petrochemicals industry at times of high energy demand during the winter months. In 2012, methanol output was just 313,000 tonnes, down from 554,000 tonnes in 2011, due to insufficient natural gas feedstock to operate Methanex's complex following the curtailment of supply from Argentina and reliance on Chile's relatively small amount of gas supply. This is a fraction of the country's total methanol capacity. Although investment has been made in accelerating the exploration and development of natural gas in southern Chile, the potential for a significant increase in gas production is more challenging than originally anticipated. One methanol plant was brought back onstream in Q113 as a result of a deal to secure sufficient natural gas to sustain its operations, but BMI doubts the sustainability of the operation. Two methanol plants are being relocated to the US, leading to the loss of 2mn tpa of capacity.
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BMI has revised the following forecasts/views:
- Energy shortages plague polymer production. A lack of propylene feedstock has meant that Petroquim has failed to produce near the 150,000tpa capacity at its PP plant. As such, BMI forecasts that capacities will not be increased over the forecast period, with ethylene capacity at 60,000tpa, propylene at 100,000tpa, PE at 46,000tpa and PP at 150,000tpa.
- The ability of Chile to revive its petrochemicals industry will depend on overcoming upstream supply constraints. Refining capacity is likely to remain at 226,800b/d over the medium-term, thereby restricting naphtha availability. In relation to ethane as feedstock, gas production is also insufficient and although efforts are underway to exploit unconventional reserves they are unlikely to prompt investment in petrochemicals in the forecast period.
- In BMI's Latin America Petrochemicals Risk/Reward Ratings, Chile scores 40.1 points, down 5.0 points since last year, and falls one place to seventh place in the regional rankings, 3.1 points behind Colombia and 0.7 points ahead of Venezuela. Its main strengths are its infrastructure, market structure, long-term political risk and financial risk, but in terms of industrial activities it remains a marginal player and its position is unlikely to improve while there is a lack of feedstock capacity.
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