Manuel Díaz Executive Director, APLA
"The extreme dependence on certain raw materials from particular countries has caused a rethink of the whole dynamic. Latin America should be more self-sufficient in certain products such as urea."
What are the main themes of APLA’s Annual Meeting in Cancun?
The petrochemical industry exited the pandemic in a good shape, yet it immediately entered another crisis of economic slowdown and high energy and logistic costs. This is creating uncertainty. One of the key themes during our annual meeting is an analysis of energy prices and access to feedstock. Another area of concern is logistics. As Europe requires more LNG, this is already affecting the normal flow of ships in Latin America. Moreover, another question is: Is the plan to move towards a net-zero carbon industry at risk? Finally, one of the key pillars of our meeting is sustainability.
How is the geopolitical and economic scenario affecting industry dynamics?
The weakening of the euro is related to negative economic projections in Europe. More than the exchange rate as such, what is affecting the industry more deeply is the economic slowdown, because this may cause adjustments to production capacities, generating either a shortage of certain products or higher costs. Then, if the current gas supply constraints in Europe worsen, that will definitely have a negative impact on global logistics. With regards to high oil prices, this has two impacts: one on the production chains of petrochemical products, especially in countries with naphtha-based industries, and one on the general economic situation.
In terms of the energy transition, the main question is if the current context of high energy prices and supply disruptions can act as an accelerator. There is a lot of energy capacity that needs to be replaced, but this crisis can act as an opportunity for a matrix that is both more renewable and more based on local resources. Brazil is investing heavily in wind farms, for instance.
Can this be an opportunity for Latin America to be more self-sufficient?
A reduction of globalization levels is already underway. The extreme dependence on certain raw materials from particular countries has caused a rethink of the whole dynamic. Latin America should be more self-sufficient in certain products such as urea; this would be a logical geopolitical step for the future of the region, and goes beyond the current Russia-Ukraine conflict.
Also, the development of unconventionals plays a key role in this process to add value to the regional economies. The continuous progress in this respect, particularly in Argentina, is helping reduce the amount of liquified natural gas (LNG) that the country imports every year. For that, the construction of a gas pipeline is still pending, so the products of Vaca Muerta can be exported. Argentina has restarted investments in this area and some projects have been announced whereby the country would invest in liquefaction facilities, which would transform Argentina into an LNG exporter. There are also projects to restart exports of natural gas to Chile, and even export natural gas to Brazil, but these plans are still preliminary. Regionally, the main petrochemical project underway is the construction of an ethane import plant in Mexico at Braskem Idesa’s facility.