MOSCOW (MRC) -- Braskem SA, Latin America's largest petrochemical company, may halt production at most of its plants in March if it fails to extend a supply agreement with oil company and key shareholder Petrobras , Braskem's CEO said in a newspaper interview, reported Reuters.
Braskem's plants in Sao Paulo, Bahia and Rio Grande do Sul are dependent on naphtha supply and may need to interrupt production, said CEO Carlos Fadigas. The move would be a potentially heavy blow to Brazil's beleaguered economy at a time when it is being undermined in part by a corruption scandal at state-run Petroleo Brasileiro SA, as Petrobras is formally known.
The Odebrecht Group, which controls Braskem, also supplies construction and engineering, shipping and other services to Petrobras. Executives from Odebrecht and other major construction and engineering firms have been caught up in the Petrobras corruption probe that has forced Petrobras to suspend payments as well as its work with some companies.
Petrobras owns 37% of Braskem and is Odebrecht's principal partner in the company.
Braskem's and Petrobras' naphtha supply agreement, worth about 9 billion reais (USD3.2 billion) a year, expires at the end of the month. Naphtha accounts for more than two-thirds of Braskem's costs, according to the O Estado de S.Paulo newspaper.
"I don't know what happens next. When we discussed renewing the contract in the past, Petrobras said it would not deliver any naphtha without an agreement," Fadigas told Estado in the interview.
Braskem already froze investments worth 1 billion reais due to the uncertain naphtha supply, Fadigas said. Long-term deals with potential clients have also been postponed.
As MRC informed before, Braskem plans to build a new polyethylene (PE) plant at its existing complex in La Porte, Texas. The new plant will manufacture ultra-high molecular weight polyethylene (UHMWPE), making it the first time for Braskem to produce UHMWPE outside of its home base in Brazil. Construction on the plant began in the third quarter of 2014, with completion expected in the first half of 2016.
Braskem is Brazilian main producer of polyethylene and polypropylene. In addition with ongoing plants located in both petrochemical complexes, in April 2008 Braskem opened a 300,000 metric ton polypropylene plant in the city of Paulinia (Sao Paulo).
MRC