Mexico's Pemex begins supplementing ethane stocks with US imports

Houston (Platts)--12 Jan 2018 441 pm EST/2141 GMT

Mexico's first cargo of US-sourced ethane arrived Friday in Coatzacoalcos in Veracruz state, as state-owned Pemex seeks to boost its supply of the petrochemical feedstock, sources said.

The Vitol-chartered Bow Guardian departed Enterprise Products Partners' Morgan's Point, Texas, export terminal Tuesday. The 10,300-mt ethylene carrier can load up to 75,000 barrels of ethane.

The cargo is part of a multi-month term deal, with Vitol chartering the vessel on behalf of Enterprise, a source said.

Vitol representatives did not respond to requests for confirmation and an Enterprise trader declined to comment.

A source with knowledge of Pemex operations confirmed the company entered into a six-month agreement to source ethane from the US. The deal could be extended, the source said.

Mexico is the latest destination for US ethane, for which waterborne exports began in 2016 out of Marcus Hook, Pennsylvania, and later Morgan's Point. Other export destinations for US ethane include the UK, India and Brazil, as well as Canada via pipeline.

Similar to the US, Mexico's production of basic petrochemicals, for which Pemex held a monopoly until the arrival of Braskem Idesa's world-scale olefins and derivative PE plant in 2016, relies on ethane as its primary feedstock.

The agreement comes as Pemex's internal analysis points to ethane production in Mexico decreasing by as much as 20% to around 80,000 b/d in 2018, the source said.

With Pemex contractually required to supply Braskem Idesa with 66,000 b/d of ethane, a decrease in production would severely impact Pemex's ability to produce ethylene, the source said.

In addition to supplying feedstock to Braskem Idesa's complex in Nanchital, also in Veracruz state, Pemex also supplies ethane to two nearby ethylene plants at its Cangrejera and Morelos complexes. The two Pemex crackers can consume up to 68,000 b/d of ethane combined if run at full rates.

A third Pemex ethylene plant, capable of consuming up to 11,000 b/d of ethane, has sat idle since April 2016 after a deadly explosion and fire at an adjacent downstream capacity halted operations.

Officials from Pemex did not respond to requests for comment.

A Braskem Idesa official this week said Pemex has been meeting its contractual obligations without interruption in recent months.

About 2.3 million barrels of US ethane have moved so far this month or are currently loading, according to Platts Analytics data. A trading source said he expects 6 million barrels of ethane to be exported in January, including 1 million barrels from Energy Transfer's Marcus Hook terminal.

Gulf Coast ethane prices have been on the rise in the last two weeks, climbing 4.25 cents between December 29 and Thursday's assessment at 28 cents/gal.

January non-LST ethane, reflecting prices at the Enterprise storage caverns in Mont Belvieu, Texas, was trading at parity to Thursday's assessment midday Friday.

Market sources have attributed higher ethane prices to natural gas plant freezeoffs tightening supply, concerns over more cold weather that could continue to affect production, and strong natural gas futures.

On the ethylene front, US spot was last assessed Thursday at 27-27.5 cents/lb FD USG for prompt-month and 27.125-27.625 FD USG for forward-month, up 0.75 cent amid healthy run rates along the US Gulf Coast region.

--Andrea Salazar, --Phillipe Craig, --Edited by Annie Siebert,

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