Financing for key petrochemical projects in Venezuela

(March 24, 1992).- Contributing to the policy of its member countries to promote foreign investments and stimulate the private sector, CAF today granted a US$47 million loan for the joint venture Supermetanol CA to develop Methanol II, an important petrochemical project in Venezuela.

The loan operation was approved by the 73rd meeting of the Board held in Caracas on March 23 and 24. The meeting was chaired by Ecuadorian Minister of Industry, Commerce, Integration and Fisheries Juan Falconi, who was appointed to chair the Board and Shareholders meetings for a one year term.

This is the third loan that CAF has granted to the Venezuelan petrochemical industry, a sector with great potential for development. It is also the largest loan the Corporation has granted to the private sector of its five member countries.

In this same month, a US$30 million loan was made available to the Resilin company for construction and start up of a lineal polyethylene plant in the Zulia Petrochemical Complex. Previously, a US$42 million loan had been granted to PRALCA (hydrated alcohols), also located in Zulia state.

Supermetanol, CA Supermetanol, like Pralca and Resilin, is a joint venture formed by Pequiven, subsidiary of Petróleos de Venezuela, and representatives of the private sector. Financing for these projects is being granted by several multilateral organizations (such as CAF and IFC), international banks and local and foreign private capital.

The company Supermetanol was formed in August 1991 with shareholders Pequiven (34.5%) and Ecofuel (34.5%), together with a group of international financial institutions which participate in the joint venture through debt investment swaps (31%).

Ecofuel is wholly owned by Agip-Petroli, one of the leading companies of the Italian ENI Group (Ente Nacionale Idrocarburi) owned by the Italian State.

Metanol II The Methanol II project consists of the design, construction and start up of a plant located in the Jose Antonio Anzoátegui Petrochemical Complex, 28 km west of Puerto La Cruz.

The plant will produce 2,000 metric tons a day of chemical-grade methanol using natural gas as basic raw material, which is very abundant in Venezuela with one of the lowest prices in the world.

Basic engineering for the project was prepared by the UK company Davy McKee with a recognized international reputation in the area. Detail engineering, equipment procurement and construction management will be executed by the Snamprogetti/ Tecnoconsult consortium, based on offshore and onshore agreements which have been negotiated with Supermetanol.

To execute the Supermetanol project, full environmental impact and industrial safety studies, which confirmed that the project was environmentally safe and sustainable, were submitted for consideration to the Ministry of Environment and Renewable Natural Resources.

The product Methanol or methyl alcohol is an intermediate industrial product used in the preparation of other chemical products, such as those used to produce resins for construction materials, raise the octane of gasoline or as oxygenate to produce less polluting gas emissions from engines.

For example, MTBE - which is manufactured from methanol - is a product which in the future will have to be added to gasoline in the United States to comply with the Clean Air Act standards approved by the US Congress in 1990 which begin to come into force at the end of this year. This development creates real expectations about strong demand for this product on the US market and probably in the developed countries.

Half the production of this plant will be exported mainly to the United States while the rest will cover domestic demand. Venezuela currently imports 200,000 mt/year of methanol, 90% of which is used to supply the MTBE plant of the Superoctanos company, located in Jose, which has the same main partners as Supermetanol.

Cost The total cost of the project is estimated at US$364 million, to be financed by Pequiven, Ecofuel, other financial partners, CAF and international institutions.

It should be noted that a similar project - Metanol I - is expected to start commercial operations in early 1994, six months before Metanol II. The production of this plant will be exported to Japan, the United States with a part for domestic consumption.