Some Thoughts On PEMEX v. BASF

BASF doesn’t steal, it just makes stealing better for criminals. PEMEX’s sentiments, not mine. As you may have heard, Mexico’s national oil company is suing BASF over BASF’s purchases of natural gas condensate pilfered from PEMEX’s natural gas fields in northern Mexico. My first reaction seeing headlines about this was “say what!?” This is a rather serious accusation being leveled at the largest chemical company in the world. The court filing clarifies matters somewhat. For instance, Pemex isn’t accusing BASF of knowingly buying the condensate, which BASF used as a feedstock at a Port Arthur, Texas, cracker. And BASF halted the purchases as soon as it found out. But I still have some questions and observations. How did Trammo Petroleum, which apparently knew that the condensate was stolen, represent the material to BASF? Was BASF suspicious? What questions did BASF ask? What were Trammo’s answers to those questions? How much did BASF pay for the condensate? How do these prices compare with the going rate for condensate and other feedstocks at the time (round about early 2009)? Should these prices have raised red flags? Did BASF test the condensate’s composition? Might that have told BASF where it was from? Usually when one deals with criminals, something just doesn’t feel right. A little spider sense starts to tingle. There are some with the ability to interpret this sense right away. They are called “street smart”. For everyone else, it isn’t until it’s too late—such as when law enforcement gets involved or the national oil company of Mexico sues you—that it becomes clear that something illegal has been afoot. And what about Verbund? This is BASF’s mantra, like Fahrvergnügen is for Volkswagen. Verbund suggests that everything that BASF does is very deliberate and integrated—all of the molecules coming into a BASF plant are nurtured into being the best compounds they can possibly be. This idea doesn’t seem to square of the thought of BASF buying feedstocks off a truck hijacked in Mexico. (A little poetic license needs to be granted here. The condensate from the hijacked trucks was transferred to other trucks to cross the border.) BASF has fairly extensive operations in Mexico, especially around Altamira. It and many other chemical companies have been trying to get more feedstocks out of PEMEX for years. PEMEX, which needs to pay a lofty tax bill to help maintain Mexico’s federal budget, can hardly afford to increase capacity. This is why the country has a massive deficit in chemical trade. Guess how much $300 million in condensate being stolen from PEMEX helps BASF and other chemical makers in Mexico? Answer: Not at all. I can make excuses for BASF. Early 2009 was a time when a lot of people in all aspects of business were liquidating inventories. Remember the rock bottom prices at Stein Mart? I’m sure that back then all sorts of spot volumes of feedstocks and chemicals could be had around the Gulf Coast at attractive prices. Nevertheless, I do expect better from a company that has been an industry leader in measuring itself according to social, as well as economic and environmental, performance.

Author: Alex Tullo

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