Giuliana Napolitano
São Paulo – The Brazilian petrochemical industry may take advantage of the intention of Gulf countries have of attracting foreign investment to the sector. But it is first necessary to get organized, i.e., finish the restructuring process of Brazilian companies so as to make them competitive on foreign markets.
This is the evaluation of Fabiana Fantoni, an analyst specialized in petrochemicals at Tendências Consultoria Integrada (a consulting company). "In the long run, Brazilian companies may invest in the Gulf", she stated.
Fabiana pointed out that Brazil has giants in the sector, such as Braskem, a group formed through the participation of companies such as Odebrecht (group active in engineering and construction, chemicals and petrochemicals, and infrastructure and public services, with participation in oil and gas, tourism and pulp manufacturing ventures) and Petrobras (the Brazilian state-owned oil company). It is the largest petrochemical conglomerate in Latin America, with 13 factories in the states of Alagoas and Bahia (both in northeastern Brazil), São Paulo (in the southeast of the country) and Rio Grande do Sul (far south), and annual revenue of around US$ 3 billion.
"Braskem could, for example, establish a partnership with some international group and invest in the Middle East", believes Fabiana.
Brazilian Development Bank study
The government also seems to be betting on expansion in the sector. This year, the Mines and Energy Ministry requested that the Brazilian Development Bank (BNDES) organize a study of the Brazilian petrochemical industry.
Details of the study have not been published, but it is clear that an attempt will be made at making the sector more competitive, especially after the worldwide merger and acquisition process creating petrochemical giants. One example is the merger between Exxon and Mobil – currently, the new company has yearly revenue of US$ 200 billion and factories in 24 countries.
BNDES evaluation is that the Brazilian petrochemical industry needs to grow in scale so as to be able to operate abroad. According to Fabiana, the bank will make credit available for greater investment in the sector.
The government is also planning to interfere in the process that is restructuring petrochemical companies. Firstly, to undo the partnership knot that, Fabiana believes, has been jamming development in the sector.
The most controversial point is that Petrobras would like to increase its presence in the sector. "The company wants to return to the former model, prior to privatization, when it influenced the decision of petrochemical companies", says Fabiana.
The company currently has minority participation in three petrochemical poles in the country – Braskem, Copesul and Rio Polímeros. But the company has no power of decision, i.e., it does not influence company administration.
To Fabiana, Petrobras should participate in the sector – "after all, it provides the naphtha, raw material for the industry". "But participation must be minority", she believes.
"This is because, in the past, Petrobras action generated conflict of interest regarding private owned companies, harming development in the sector", she states.
Petrobras disagrees. To company CEO, José Eduardo Dutra, company distancing from the sector was politically motivated and should be rethought.
Quality raw material
What is in game is, in a nutshell, the chance of operating near the largest world stocks of petroleum and gas – the Arabian Gulf. The region has almost half the petroleum reserves in the world, and at least 15% of the gas reserves. But, despite the quality raw material, the bloc answers to only about 5% of global petrochemical capacity.
Last week, executives from two large Saudi state-owned companies – Saudi Arabian Basic Industries Corporation (Sabic) and Saudi International Petrochemical – informed Arab press that Gulf countries needed foreign investment so as to expand the local petrochemical industry.
The Arabian Gulf countries, Saudi Arabia, Bahrain, Qatar, United Arab Emirates, Yemen, Kuwait and Oman, all together, possess around 470 billion barrels of oil, little over 45% of world supplies.
In the gas sector, Qatar has the second largest reserves in the world, 25 trillion cubic meters, representing 15% of global stock. Planned investment of US$ 25 billion – from the government and from the private sector – should increase country production by 50% up to 2010.
