International
Venezuela's petrochemicals may turn corner Government-owned Pequiven may operate profitably this year for first time, as both Moron and El Tablazo plants are running well This year may be a milestone for Pequiven (Petroquimica de Venezuela S.A.), the government-owned company charged with developing Venezuela's petrochemical industry. For the first time in its five-year existence, Pequiven seems all but certain to turn a profit. In the first quarter, the volume of Pequiven's domestic sales was running 25% ahead of last year, on an annualized basis. Exports in the quarter were 16.7% higher than last year's rate. Plants at the company's two petrochemical complexes at Moron and El Tablazo are running—and running efficiently. That wasn't always true. Expansion plans, based on sound market and technical analyses, are in the works. That wasn't always the case. Despite the optimistic outlook, Pequiven president Manuel Ramos
As Pequiven's output rises, operating losses go down Millions of metric tons 1.5
$ Millions 3 150
100
a Converted at $1.00 4.292 bolivars; does not include government subsidy for domestic fertilizer sales. Source: Pequiven
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C&EN May 31, 1982
refuses to commit himself to projecting a profitable year for his company. The best that he will do is "hope" that Pequiven operates profitably in 1982. Ramos points out that, since the start of the petrochemical industry's reorganization in Venezuela, Pequiven executives deliberately have avoided projecting the future. Too many past projections have been way off the mark. "We don't say, 'We will do this' anymore," says Ramos, "It's better to say, 'We did that.' " No doubt these faulty projections that Ramos refers to were made before Pequiven took over the helm. Prior to that, the industry was run by Institute) Venezolano de Petroquimica (IVP), essentially a ministerial office ruled by a public administrator. Ill-conceived and badly managed, IVP piled up huge losses in its 21-year life span. Poorly designed and operated plants, which were down more often than they were on stream, didn't help matters. After the oil industry was nationalized in 1976, it became apparent that something drastic had to be done to salvage the petrochemical sector. In December 1977, Pequiven was formed. Three months later, all of Pequiven's shares were transferred to Petroleos de Venezuela (PDVSA), making Pequiven a wholly owned subsidiary of the state-owned oil company. What Pequiven needed most was managerial and technical expertise. The managerial talent came from a small core of executives transferred over from PDVSA. Ramos was one of them. The technical expertise came from outside sources. Outside technical help was necessary, says Ramos, because there was very little of it available in Venezuela. There were a few holdovers from the old IVP with chemical engineering training. A few came over from PDVSA, but most of them were managers, not engineers. Other than that, there were only a few young, new graduates. As a result, Pequiven called in Phillips Petroleum on a three-year technical assistance contract to get the ethylene plant at El Tablazo operating properly. The plant now is, but the contract has been renewed
Ramos: cautious about projections
anyway. Phillips also has helped to increase output at Corpoven's natural gas processing plant. In addition, Pequiven has similar technical-help contracts with Snam Progetti for the ammonia and urea plants at Moron and with Diamond Shamrock for the caustic-chlorine unit at El Tablazo. This infusion of technical expertise and a new management team has paid off. Pequiven's gross production of petrochemicals has risen from 781,000 metric tons in 1977 to 1.25 million metric tons last year. That is an average 12.6%-per-year growth rate. More important, Pequiven is becoming enticingly close to profitability. In 1977, which was actually an old IVP year, the loss on petrochemical operations in Venezuela hit $781 million. Since Pequiven took over, these losses have been reduced steadily. Last year, it lost only $63 million, less than 10% of its 1977 deficit. Ramos believes that 1981 would have been profitable had the government not dropped its fertilizer subsidy. By eliminating the subsidy, prices that farmers paid for their material almost tripled without warning. Demand dropped, just when Pequiven's plants were capable of meeting it. As a result, operating rates could not be maintained so high as originally planned.
Ramos hopes that the fertilizer situation straightens itself out this year. Venferca, the company responsible for domestic fertilizer distribution, has disappeared, Palmaven, a new company, has been formed to handle domestic fertilizer sales and imports, if necessary. And since Palmaven is a 100% subsidiary of Pequiven, Pequiven will have tighter control of the fertilizer situation, from production to market. One of Pequiven's major goals is to get the 150,000 metric-ton-per-year ethylene unit at El Tablazo operating at capacity. Last year, the unit produced about 90,000 metric tons, not because it wasn't capable of more, but because demand wasn't there. Ramos points out that the ethylene unit was designed to supply three downstream units. Right now, it is supplying only two—a 40,000-ton polyvinyl chloride plant owned by Petroplas (now a wholly owned subsidiary of Pequiven) and Polilago's 59,000-metric-ton low-density polyethylene unit. Pequiven has a 40% interest in Polilago, along with Cdf Chimie (30%) and private Venezuelan interests (30%). The third unit—a 60,000-metricton high-density polyethylene plant—is expected to be on stream by the third quarter of 1983 and soak up the remainder of El Tablazo's ethylene. It will be operated by Plastilage, a joint venture of Pequiven, Cdf Chimie, Mitsui Petrochemical Industries, and Grupe Zuliano, a local Venezuelan company. Ramos estimates that the plant's capacity just about matches domestic demand, with a little left over for export. Meanwhile, feasibility studies are under way for a third petrochemical complex to be located in eastern Venezuela. The study is being done by the parent PDVSA, not Pequiven. This is not so unusual as it sounds. Pequiven's main effort, explains Ramos, "is to operate the plants we have, not plan new ones." Nevertheless, Pequiven no doubt will have a voice in the planning. PDVSA has a "petrochemical director" on its board, who acts as a liaison with Pequiven. By the time the complex is built— certainly not before 1990—the Venezuelan market will need its output, says Ramos. The complex will focus on olefins and downstream products. It will not include fertilizers as the two existing complexes do. Nor will it include aromatics. Domestic consumption, says Ramos, just isn't large enough to justify production. Ramos also says that Pequiven "is
One big goal is to get El Tablazo ethylene plant operating at capacity
considering" the possibility of building a linear low-density polyethylene plant. But in keeping with his reluctance to predict the future, he won't say when, or even if, it might happen. In addition to its own units at El Tablazo and Moron, Pequiven has an interest in nine joint ventures along with foreign multinational companies and local Venezuelan capital. Pequiven's share ranges from 11.4% in Ox-
idor (phthalic anhydride) to 75% in Ferralca (aluminum sulfate). The exception is Petroplas, which produces PVC at El Tablazo. Pequiven bought B. F. Goodrich's share in 1980 and now owns all of it. Since Pequiven was formed, output of these downstream subsidiaries has risen dramatically. Last year combined output was 239,000 metric tons, 55% higher than in 1978. Earl Anderson, New York
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