Mexico cuts natural gas supply to Braskem plant

Mexico's state-owned pipeline administrator Cenagas cut natural gas supply to Braskem Idesa's Ethylene XXI plant based on corruption allegations.

"The company will have no more natural gas because the contract has expired — supply was not interrupted — and it will not be renewed," President Andres Manuel Lopez Obrador said today.

Braskem Idesa's natural gas transport contract expired at the end of November. Cenagas decided not to renew it given alleged corruption in the awarding of the contract, a government official told Argus today.

Gas transport contracts would usually only be cancelled or not renewed in the event of failure to pay, a former Cenagas official told Argus.

Braskem Idesa's 58,771 GJ/d gas transport contract — required to power operations at its plant — started on 1 July 2017 and expired on 30 November, according to information from the Cenagas electronic bulletin board.

The plant has been at the center of a long-running corruption investigation linked to Braskem's parent company, Brazil's Odebrecht.

President Andres Manuel Lopez Obrador has repeatedly called for cancellation of state-owned Pemex's 20-year contract — signed in 2010 — to sell ethane to the ethylene plant at below-market cost.

The contract has proven controversial as, in addition to the below-market rates, Pemex has been forced to make costly ethane imports to meet demand in its own ethylene plants.

Pemex's ethane production from wet gas processing — which is essential to meet contractual commitments to the plant — dropped to a five-year low of 61,000 b/d in October, down from the 80,000 b/d produced in October last year and down from 70,000 b/d in the previous month.

Following the failure of Braskem Idesa and Pemex to renegotiate terms, Lopez Obrador said he had ordered cancellation of the contract on 13 November. Braskem Idesa maintained at the time that the contract remained valid.

By Rebecca Conan