New loan granted to Venezuelan petrochemical sector

(March 1, 1993). -- CAF today granted a US$47 million loan to the Venezuelan petrochemical company SUPERMETONAL, CA, which raises the amount loaned to this important sector of the country to over US$140 million.

The loan will cofinance construction of a chemical plant to produce methanol, a product for which there is growing demand on international markets and which the country currently imports.

The agreement was signed by CAF President & CEO Enrique García; the general manager of SUPERMETANOL, Angelo Coppacchioli; Pequiven directors Juan Szabo and Antonio Ortíz; and Walter D’Angelis representing ECOFUEL. Also present were former Pequiven president Hugo Finol, the vice president of Chemical Bank, Alfonso Rodríguez, and the representative of Banca Commerciale Italiana, Leopold Ciconetti.

With this operation, CAF is supporting the Venezuelan state and a group of private international investors, mainly Italian, interested in channeling funds into this sector considered high priority for the development of Venezuela.

The petrochemical industry has significant comparative advantages at international level because it uses raw materials which are very abundant in the country at a cost which is considered one of the lowest in the world.

Support for petrochemical industry The CAF president said the Corporation had supported -- and would continue to do so – all industries which submit financially viable projects, with broad potential for development, and participation of private investors. These actions contribute to the policy adopted by its member countries with respect to promoting investments and stimulating the private sector.

With this operation, a total of five loans have been granted to this sector. The first for US$9,310,000 was for the ETOXYL company; later in 1990, US$42 million was granted to PRALCA; in 1992 US$30 million to RESILIN, and today, US$47 million for SUPERMETANOL. A further US$12.9 million was approved last January 26 in favor of the companies:

SUPERMETANOL, CA Supermetanol, like Pralca and Resilin, are joint ventures formed by Pequivan, subsidiary of Petróleos de Venezuela, and the private sector. Financing for the project is being granted by several multilateral organizations, international banks and local and foreign private capital.

The Supermetanol company was formed in August 1991 with shareholders Pequiven (34.5%) and Ecofuel (34.5%) together with international financial institutions (Chemical Bank and Banca Commerciale Italiana), which participate through the debt-investment conversion mechanism (31% of equity).

Ecofuel is wholly owned by Agip-Petroli, one of the leading companies in the Italian ENI group (Ente Nationales Idrocarbori) owned by the Italian State.

This equity participation is a clear example of the confidence that international banks and developed countries have placed in this project and in the Venezuelan petrochemical industry.

Metanol II The CAF loan will contribute to execution of the Metanol II project, which consists of design, construction and start up of a plant located in the José Antonio Anzoátegui Petrochemical Complex, 20 km west of Puerto La Cruz.

The plant will produce 2,000 metric tons a day of chemical-grade methanol, using natural gas, which is very abundant and economic in the country, as basic raw material.

The basic engineering of the project was prepared by the British company Davy McKee, with an international reputation in the area. Detail engineering, equipment procurement and construction management will be provided by the Snamprogetti/Tecnoconsult consortium, based on offshore and onshore agreements with Supermetanol.

To execute this project, Supermetanol prepared a complete environmental impact and industrial safety study, which was submitted for consideration to the Ministry of Environment and Renewable Natural Resources and reviewed by high-level experts in CAF, which confirmed that it is environmentally safe and sustainable.

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

For example, MTBE -- which is produced from methanol -- is a product which in the future will be added to gasoline in the United States to comply with the standards of the Clean Air Act which was passed by the US Congress in 1990 and will begin to come into force this year. This development has created real expectations about the demand for this product on the US market and in other developed countries.

Half the production of this plant will be exported to the United States and the rest will cover domestic demand. Venezuela currently imports 200,000 mt/year of methanol, 90% of which supplies the MTBE plant of the company Superoctanos located in Jose, whose main partners are the same as those of Supermetanol.

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

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