PETROCHEMICAL INDUSTRY

Brief history of the petrochemical complexes in Brazil The history of Brazils petrochemical industry began in the early 50s, when intense demand emerged for a new product: plastics. Amid this development and modernization period, consumption grew rapidly, signaling the need to create a national industry capable of meeting this demand. Until then, the country had met its needs through imports. Today, the main petrochemical complexes, which are integrated with the feedstock cracking units, are: Capuava in So Paulo, Camaari in Bahia, Triunfo in Rio Grande do Sul and Duque de Caxias in Rio de Janeiro. Petrobras is currently developing a new complex, the Rio de Janeiro Petrochemical Complex (Comperj), which operation schedule for 2014. Capuava Complex (So Paulo state)(SP) The first complex established in Brazil, started operations in 1972. The project was funded by private capital from a So Paulo business group (Unio), in partnership with the government and with the participation of foreign capital, which came to be known as the Tripartite model. The governments investment was made through Petroquisa, a Petrobras subsidiary for the petrochemical industry, while the foreign capital was important for providing the required technology. Today the complex comprises producers of petrochemical products used to make thermoplastic resins, rubbers, paints and other products. The complex has ethylene production capacity of 730 kton. Camaari Complex (Bahia state) The Camaari Complex, Brazils first planned petrochemical complex, started its operations in 1978, and also adopted the Tripartite funding model. The complex is composed of producers of petrochemical products used to make thermoplastic resins, fertilizers and copper metallurgy, as well as other applications. The petrochemical complex has ethylene production capacity of 1,280 kton. Triunfo Complex (Rio Grande do Sul state) After the complex in the state of Bahia, this was the third naphtha-based petrochemical complex built in Brazil in the 70s. The Triunfo complex cracker - Copesul (today Braskem) - started operations in 1982. Today the Triunfo Complex has annual ethylene production capacity of 1,240 kton. Duque de Caxias Complex (Rio de Janeiro state) Brazils first integrated gas-chemical complex was built in Duque de Caxias, Rio de Janeiro. Operations started up in 2005, and the gas cracking unit has annual ethylene production capacity of 520 kton. Comperj (Rio de Janeiro state) The Rio de Janeiro Petrochemical Complex (Comperj) is a megaproject developed by Petrobras with total investment of over US$8 billion and it will be the primary component for the Southeast complex. With operational startup expected in 2014, Comperj will increase domestic heavy petroleum refining capacity, while also producing 1,300 kt/year of ethylene and 880 kt/year of propylene, along with other oil distillates. The interest held by the private sector has yet to be defined, but the Brazilian petrochemical companies, Braskem and Quattor, have already expressed their interest.

Overview of the Brazilian Petrochemical Industry

The petrochemical chain is divided into first, second and third generation producers, based on the manufacturing phase of the various petrochemical raw materials or inputs. The chain represents the transformation of sub-products obtained from the refining of crude oil, primarily naphtha or natural gas, into consumer or industrial products used for a variety of purposes The main raw material used in Brazils petrochemical chain is naphtha, followed by natural gas. Petrobras is the only producer of naphtha and natural gas in Brazil, meeting domestic demand through its own production as well as imports. Petrobras monopoly was broken in 2002, and since then local petrochemical complexes have begun to import these products directly to meet their

The naphtha and/or gas undergo a process called cracking, which results in the basic petrochemicals such as ethylene, propylene and aromatics. The type of feedstock (i.e., raw material) used results in various different yields and product mixes.

See also Braskems production process:

First Generation Producers In Brazil, first generation producers, known as crackers, fracture or crack the naphtha (a byproduct of the oil refining process) or natural gas, the two main feedstocks used, transforming them into basic petrochemicals. The crackers buy their naphtha mainly from Petrobras, but also from foreign suppliers. Crackers using natural gas as feedstock are supplied exclusively by Petrobras. The basic petrochemicals produced by naphtha cracking units include: -olefins, mainly ethylene, propylene and butadiene; and -aromatics, such as benzene, toluene and xylenes. Brazils first generation companies are Braskem and Quattor, which operate four cracking units and sell basic petrochemicals to second generation producers, promoting the integration of the chain. Basic petrochemicals, which have gaseous or liquid forms, are basically transported through pipelines to second generation producers, which in general are located near cracking units, where they undergo additional processing. Second Generation Producers Second generation producers process the basic petrochemicals purchased from naphtha cracking units to make intermediate petrochemical products, which include: -polyethylene, polystyrene and EDC/PVC (made from ethylene); -polypropylene and acrylonitrile (made from propylene); -cumene and ethylbenzene (made from benzene): and -polybutadiene (made from butadiene). Intermediate petrochemicals are produced in solid forms in pallets or in powdered form and are usually transported by truck to the sites of third generation producers, which generally are not located near second generation producers. Braskem and Quattor are the only integrated first and second generation thermoplastic resin producers operating in Brazil, and Braskem is the only 100% integrated producer.

Third generation producers Third generation manufacturers purchase intermediate petrochemicals from second generation producers and transform them into final products, including: -plastics (made from polyethylene, polypropylene and PVC): -acrylic fibers (made from acrylonitrile): -nylon (which in Brazil is made from phenol): -elastomers (made from butadiene); and -disposable packaging (made from polystyrene and polypropylene). Third generation manufacturers make a variety of consumer and industrial products, including containers and packaging materials such as sacks, shrink wrap and bottles, fabrics, detergents, paints, auto parts, toys and consumer electronics. Brazil currently has more than 11,000 third generation manufacturers.

The Role of Petrobras Prior to 1995, Brazils constitution gave the government a monopoly, exercised through Petrobras, in the research, exploration, production, refinement, importation and transport of all crude oil and refined petroleum products (excluding petrochemicals) in Brazil. The constitution also stated that byproducts of the refining process, such as naphtha, could only be supplied in Brazil by Petrobras or its intermediary. Naphtha is the primary feedstock used in Brazil in the production of basic petrochemicals such as ethylene and propylene. In 1995, Brazils constitution was amended to allow oil and oil-related activities to be exercised by private companies through concessions or licenses granted by the federal government. Since 1995, the federal government has implemented a number of measures to deregulate the countrys petrochemical industry.

In 1997, Federal Law 9,478/97 regulated the constitutional amendment of 1995 by creating the National Energy Policy Council and the National Petroleum Agency, which were charged with regulating and overseeing the countrys petroleum and energy sectors. With the creation of the National Petroleum Agency, new rules and regulations were introduced to eliminate gradually Petrobras monopoly. Brazil currently depends on imports for close to a third of its naphtha consumption

Thermoplastic Resins Market Overview Brazils petrochemical industry accounts for 1.5% of the countrys GDP and is responsible for over 329,000 jobs, playing an important role in the national economy. Brazil is Latin Americas leading producer of basic petrochemicals and also leads the region in second generation petrochemical capacity. Brazils importance in the region is the result of the reorganization of the countrys petrochemical industry and growth in domestic demand. Apparent consumption of thermoplastic resins in Brazil (domestic production plus imports less exports) has grown over the past few years at an average annual rate of 4.4%, driven by Brazils economic growth, better distribution of wealth and higher purchasing power in the C, D and E income groups.
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Considering only the resins market (PE, PP, PVC), the potential for growth in plastics consumption in Brazil is demonstrated by a comparison with consumption rates in developed nations such as the United States, where in 2008 resin consumption stood at 80 kg per person, compared with just 20 kg per person in Brazil. Since the introduction of the Brazilian real in 1994 and the subsequent stabilization of the countrys economy, resin consumption has registered strong growth. Prices in the Brazilian Market Prices for petrochemical products in the Brazilian market follow international benchmarks. In the case of resins, Brazilian prices differ from international benchmarks, since they are based on international prices plus import costs (freight, insurance, import duties, etc.).
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Source: ABIQUIM