Braskem Idesa to shut down PE plants after Mexico cuts off gas.

Petrotahlil -Braskem Idesa is shutting down operations at its Ethylene XXI polyethylene (PE) complex in Mexico after a state agency notified the joint venture that it would be cutting off supplies of natural gas, Braskem said on Wednesday.

Braskem said it does not know when natural gas will return to the site. The Brazilian polyolefins producer owns a 75% stake in the Braskem Idesa, with Mexican producer Grupo Idesa owning the remaining stake.

Braskem said the National Centre for the Control of Natural Gas (Cenagas) is taking the action unilaterally. Braskem Idesa will pursue legal action to preserve its rights.

Braskem did not say why Cenagas was cutting off gas supplies.

Ethylene XXI produces ethylene, high density PE (HDPE) and low density PE (LDPE). It is in Coatzacoalcos.

Ethylene XXI has faced criticism from Mexican President Andres Manuel Lopez Obrador, commonly known as AMLO.

The president has alleged that Ethylene XXI receives its ethane for its cracker at an unfair discount under a 20-year contract with state energy producer Pemex.

AMLO had focused on ethane, however, and not on natural gas.

Braskem Idesa has vigorously defended the ethane contract.

When Pemex signed the contract, it had an excess of ethane. That surplus has since swung to a shortage because of falling oil production.

As a result, Pemex has reduced its ethane shipments to Ethylene XXI, violating the terms of the contract and racking up penalties, according to Braskem.

Braskem Idesa has resorted to ethane imports from the US to offset a portion of the shortfall.

Meanwhile, Pemex still does not have enough ethane for its own crackers. Like Braskem Idesa, it has also resorted to imports to offset a portion of the shortfall.

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