Bloomberg News

Mexichem to Target Shale Gas Should Mexico Relax Monopoly

March 26, 2012

Mexichem SAB (MEXCHEM*), the chemicals maker that has bought more than 15 companies since 2007, will seek to develop Mexico’s first shale-gas projects if the country sells licenses that would bypass a monopoly on fossil fuels.

“There are a lot of petrochemical areas with growth opportunities for us, and where we have no presence yet -- shale gas for example,” Antonio del Valle Ruiz, Mexichem’s chairman emeritus, said in a March 23 interview after participating in a Bloomberg CEO Roundtable in Mexico City. Mexico would need to offer shale-gas projects as mining permits to bypass the government’s petroleum monopoly without changing the law, he said.

Petroleos Mexicanos, the state-run oil producer known as Pemex, “notoriously” lacks the budget to boost deep-water drilling and develop shale-gas deposits, Energy Minister Jordy Herrera said this month. Mexico, the third-largest oil supplier to the U.S., has as much as 460 trillion cubic feet of natural gas trapped in shale-rock formations, Carlos Morales, head of exploration and production at Pemex, said last year.

Shale-gas projects may lure investments of $10 billion a year, Herrera said.

The main hurdle for development of Mexico’s shale-gas industry is government bureaucracy and slowness to go ahead with plans to auction licenses, Del Valle said.

“There’s a problem with the country’s bureaucracy for the petrochemical sector that drags, and keeps dragging the projects,” he said. “We need to change the government’s philosophy, not the laws.”

Mexichem is facing regulatory delays to start a joint venture with Pemex after the companies announced a $556 million venture to produce vinyl chloride on June 28.

The joint venture may start operations in the third quarter, Del Valle said.

Mexichem rose 1.3 percent to 47.89 pesos at 10:48 a.m. in Mexico City. Before today, it gained 7.7 percent this year, more than the 3.4 percent increase in the benchmark IPC index.

To contact the reporter on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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