August 23, 2010 at 2:52 am #2551
Exclusive: Mexico mulls first crude imports in decades
By Robert Campbell Fri Aug 20, 2010 4:31pm EDT
MEXICO CITY (Reuters) – Mexico’s state oil company Pemex is studying a plan to import crude for the first time in over 30 years to improve the profitability of its refineries, according to two sources familiar with the proposal. The plan was first discussed by top managers of Pemex’s PEMX.UL refining subsidiary in March, the sources said.
“Opportunities have been identified at two refineries that could save millions of dollars,” said one of the sources, who added that Pemex was still studying the proposal and cautioned the plan may never be implemented.
The sources, who spoke on condition of anonymity because they were not authorized to comment, said the proposal to import up to 40,000 barrels a day crude has been discussed at the highest levels of Pemex, the world’s No. 7 oil producer, including among the company’s board of directors.
Pemex’s media office said no decision to import crude oil had been made and there were no immediate plans to do so.
Mexico has not imported crude oil since the discovery of huge offshore oil fields in the shallow waters of the Gulf of Mexico in the 1970s but as these fields dry up Mexico’s status as a major oil exporter is under threat.
A redacted copy of Pemex’s 2010-24 business plan obtained by Reuters through a freedom of information request calls for Pemex to “optimize the crude slate” at its refineries, which currently run below capacity when using Mexican crude alone.
Since every grade of crude oil contains a unique mix of hydrocarbons, refiners typically use a blend of crudes so that different refinery components are fully utilized. Brazil’s state-controlled oil giant Petrobras, for instance, has become a major oil exporter in recent years but Petrobras still buys some foreign crude that better suits its refineries than Brazilian oil.
Pemex is looking to increase domestic refining to meet rising demand for gasoline and diesel and reduce its growing reliance on fuel imports, which exceed 500,000 barrels a day. Experts have warned slumping oil production could turn Mexico into a net oil importer before 2020, but the sources insisted the current import proposal is aimed solely at improving refinery profitability.
Pemex’s refining subsidiary lost 92.5 billion pesos ($7 billion) last year due to government price controls on fuel and inefficient operations.
Pemex’s equity has been wiped out by heavy losses and the need to borrow to fund its investment program due to a crushing tax burden. Chief Executive Juan Jose Suarez has vowed to reduce costs and run the state giant more like a private firm.
Pemex has two refineries with port facilities capable of handling crude oil imports, one near the Gulf Coast at Ciudad Madero and another at Salina Cruz on the Pacific. The proposal calls for up to 20,000 barrels per day of crude to be purchased for each refinery depending on market conditions. The foreign crude oil grades would either displace Mexican crude currently processed or allow the refineries to run closer to their optimal capacity.
Before the plan could be implemented, Pemex would need to determine which grades of crude would best improve operations and also resolve other issues, one source said.
“We have to first figure out how to hedge price exposure, do some metallurgical studies at the refineries and see what effect imports would have on logistics,” said the source. Light, sweet crude oils that are well-suited to making gasoline are under consideration.
Pemex is taking other steps to boost fuel output, including a modernization and expansion of its Minatitlan refinery on the Gulf Coast due to be completed early next year. It is also building its first new refinery since the 1970s, which is to be completed by late 2015.
But with gasoline demand expected to continue its rapid growth, Pemex has already warned a second new refinery may be needed to keep gasoline imports at acceptable levels.
(Reporting by Robert Campbell; editing by Missy Ryan and Sofina Mirza-Reid
August 23, 2010 at 2:53 am #5505
Here is news article on Mexico considering crude imports for first time in decades. The conclusion is drawn by Reuters reviewing Pemex’s long range plan 2010-2024 business plan that states it as option for improving econmics. Reuters is quick to point out it is only option & that Brazil’s Petrobras has done similar crude swap-outs as well. Pemex/Mexico is consistent importer of refinery products and often runs losses due heavy tax burden, government price controls & lot of other government induced issues.
Even as just an alternate – it should be of great concern to all the US Refineries operating as JV taking Maya crude as base! The rapid decline in Pemex production from its major crude fields and the increasing capacity of its domestic refineries (great deal coking addition) also mentioned in this report.
<See previous post & my comments for more details/background at Coking.com News post on Mexico Crude: 10/20/08 Falling oil prices & 8/04/08 Aging Pemex Plants falter & 7/07/08 Pemex cuts rates 15% to US Refineries JV>
One of issues NOT mentioned in the article – is oil production has been falling since 2005 and it is doubtful the proven reserves will last more 10 year in aging fields Pemex. And while the Mexican Senate has admitted something needs to be done & even approved a reform bill to spur private investments – it is still hostage to the leftist who led oil industry nationalization in 1938 & still hold hostage and claim it represents stealth privatization. This is the crux crude problem – they have Huge offshore reserves in deepwater that cannot be developed without help global majors with that technology (now somewhat in question due Horizon spill) but they wont help without a portion to offset risk & size investments required.
Pemex & outside Contractors they now allow just do not have the technology of the Oil industry majors to develop these reserves.
So real problem is that old outdated investment barriers prevent Pemex/Mexico from reaching their own domestic solution to this issue – Makes you wonder what the hell NAFTA was all about if they can invest/own US companies/assets like Cemex but won’t allow US/foreign ownership in Mexico.
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