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15-08-2012

Mexichem signs MOU with Oxy

Mexichem, S.A.B. DE C.V. informs that, in order take advantage of the competitive shale gas market in North America, on July 30, 2012, it signed a Memorandum of Understanding with Occidental Chemical Corporation to evaluate the formation of a joint venture for the construction of an ethane-based cracker for the production of approximately 500,000 tons of ethylene per year. Substantially all of this ethylene would be used by OxyChem at its industrial complex in Ingleside, Texas, to produce approximately 1 million metric tons of vinyl chloride monomer (VCM) to be sold to Mexichem under a long-term supply agreement.

Through this arrangement, as well as its joint investment with Pemex, Mexichem expects to assure its supply of VCM required to operate its polyvinyl chloride (PVC) plants.

The feasibility study and basic engineering for the construction of the ethylene cracker is expected to be ready for final evaluation during the second quarter of 2013. The ethylene cracker, should it be determined to be economically justified, would likely begin operations in 2016 and would enable Mexichem to consolidate its Chlorine-vinyl chain by providing it with direct access to the production of one of the main raw materials of this chain -ethylene- and thus maintain its competitiveness in the manufacturing of its PVC products. The transaction remains subject to numerous conditions that will require additional approvals, including the completion of definitive agreements.

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