PEMEX'S PLANNED CHEMICAL SPINOFF PRAISED

PEMEX'S PLANNED CHEMICAL SPINOFF PRAISED

Energy-sector representatives in Mexico say this week's announcement by Petroleos Mexicanos that it will privatize dozens of petrochemical plants will let the state oil monopoly concentrate on core business and give manufacturers a better supply of downstream products.

Adrian Lajous, Pemex director, made the announcement Wednesday afternoon. He said the bidding process for the plants will begin in October and is expected to end in mid-July next year. Sixty-one plants in 10 complexes will be sold, the first four in the state of Veracruz."Shortly, 61 plants of Pemex Petroquimica will be put up for sale, as well as other assets relating to the plants. The units in question produce secondary petrochemical products in each and every one of the principal petrochemical complexes operated by this subsidiary of Petroleos Mexicanos," said Mr. Lajous.

Secondary petrochemicals are key ingredients in a variety of products, ranging from resins used in polyester clothing to paints, adhesives and tires.

CORE COMPETENCIES CITED

Chemical-industry representatives said the move, which was supposed to occur under Mexico's previous president, Carlos Salinas de Gortari, is much needed. "I think it's an example of what leading global companies have been going through in the last 10 years or so, which is focusing on their areas of core competencies," Raul Munoz Leos, president of DuPont Mexico, said in an interview.

By paring off Pemex Petroquimica, the petrochemicals division, Mr. Munoz said, Pemex can concentrate on what it does best - exploring for and producing oil. The private sector can step in and boost production of secondary petrochemicals that have chronically received less attention from Pemex, he said.

"I think this will strengthen Pemex and strengthen the petrochemical industry," he said, adding that downstream purchasers will benefit by having a more motivated supplier.

The four principal buyers in Mexico of secondary petrochemicals manufactured by Pemex Petroquimica are Grupo de Industria Resistol, Grupo Alfa, Celanese and Grupo Cydsa. They are expected to be involved in the bidding, and have a vested interest in doing so.

"The principal interest for these companies is a strategic interest," said Martin Lara, an analyst following the chemical industry for Bursamex Casa de

Bolsas in Mexico City. "Even if it is very expensive for them, they have to buy some of the production process. If they don't buy the production of certain products, another international company will buy these processes and will be their supplier."

The privatization of the secondary-petrochemical plants will give the four companies greater vertical integration and allow them to better supply their foreign and domestic customers, said Mr. Lara.

"When it is in the hands of the private sector, they will do more investment to satisfy demand within Mexico," the analyst said. "What I think is good for those four companies is that they will control all of the production chain of their chemical products."

Pemex said it sold 4.84 billion pesos (about $1.4 billion at 1994 exchange rates) worth of petrochemicals last year, 851 million pesos of that in exports and 1.36 billion pesos in intra-Pemex sales.

The chemical industry has long sought to have the petrochemical division spun off from Pemex because of inattention. Last year the industry's national association, the Asociacion Nacional de la Industria Quimica (ANIQ), broke unspoken rules in Mexico and publicly lambasted energy-ministry and Pemex officials for dragging out the privatization that has been promised for nearly two years.

The current ANIQ president, Raul Millares, was vacationing and could not be reached for comment. Former president Arturo Garcia, who heads Grupo Idesa and has been critical of the slow pace of petrochemical privatization, did not return numerous calls.

ABORTIVE EFFORT IN '93

Mr. Lajous of Pemex, in a Wednesday press conference, said the previous administration had hoped to put petrochemical plants out to bid in 1993 but had encountered a depressed phase in the business cycle and consequently could not get reasonable prices or sufficient interest.

In a document provided by Pemex, the state oil company said assets will be privatized by way of companies that will be formed around the principal petrochemical complexes. Pemex will retain minority stakes, which are expected to range between one-third and one-fifth. However, these stakes will eventually be liquidated, most likely through the stock market.

An intersecretarial commission will set out financial and technical criteria for the prequalification of bidders.

The Pemex document said companies winning the bids will have to honor Pemex's existing collective-bargaining agreements and must enter into long- term supply contracts with Pemex Refinacion and Pemex Gas & Basic Petrochemicals to ensure supply of feedstocks, subproducts and services.