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Pemex Cuts Crude Shell & Valero Tx Refineries

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  • #3544

    Charles Randall

    Pemex Cuts Crude Supply to Shell, Valero Refineries in Texas
    2008-07-07 16:47:50.440 (New York)
    By Andres R. Martinez
         July 7, 2008 (Bloomberg) — Petroleos Mexicanos, Mexico’s state-
    owned oil company, reduced the amount of crude oil it supplies
    to Texas refineries operated by Royal Dutch Shell Plc and
    Valero Energy Corp. as falling production curbs exports.
         The guaranteed amount of Mayan oil for a Deer Park, Texas,
    refinery jointly operated with Shell, Europe’s biggest oil
    company, was cut by 15 percent,
    the Mexico City-based company
    said in a regulatory filing. Pemex also lowered oil supplies by
    5.8 percent to the Port Arthur, Texas, refinery of Valero, the
    largest U.S. refiner.
         “We have not had any problem supplying any of our
    refineries with crude oil,” Bill Day, a Valero spokesman, said
    today in a telephone interview from San Antonio. “We don’t
    usually comment about contracts to specific refineries.”
         Falling oil output is curbing Pemex exports to the U.S.,
    which buys about 80 percent of the crude Mexico sells abroad
    Sales to the U.S. dropped to 1.07 million barrels a day in May,
    the lowest since November 1995. Mexico is the third-biggest
    supplier of crude to the U.S., after Canada and Saudi Arabia.
         Output at Pemex’s largest field, Cantarell, fell to an
    almost 12-year low in May, when crude exports dropped 22
    percent to 1.376 million barrels
    . This pushed Pemex production
    to 2.797 million barrels, below a goal of 3 million barrels.
         The revised Shell accord guarantees 170,000 barrels a day
    of Maya from May until 2023
    , Pemex said in the filing. Pemex
    provided Deer Park 200,000 barrels a day since April 2001.
         “Shell Deer Park continues to receive Maya crude oil at
    or above contract minimum rates with Pemex,” Shaun Wiggins, a
    spokesman for Shell in Houston, said in a telephone interview.
    “We also receive crude oil from other sources.”

                        Shell, Pemex Venture

         Wiggins declined further comment on changes to the Pemex
    contract. Pemex spokeswoman Martha Avelar in Mexico City could
    not immediately comment on the new supply accord.
         Pemex also reduced the supply to Valero’s Port Arthur
    refinery to 177,000 barrels a day in May from 188,000 barrels
    under a previous contract.
         Shell and Pemex formed the Deer Park joint venture in
    1993. The refinery, upgraded in 1995 to process Maya and
    expanded in 2001, is capable of producing 340,000 barrels of
    crude a day.
         Maya is a heavier grade of crude oil with a higher level
    of sulphur that refiners find more difficult to process into
         Pemex buys 50 percent of the gasoline produced at Deer
    Park and ships it back to Mexico for domestic consumption.
    Mexico’s six refineries, which have the capacity to process
    about 1.3 million barrels of crude a day, can’t produce enough
    gasoline and diesel to meet rising demand.

                             New Refineries

         Pemex needs to build a refinery every three to four years
    until 2021 to become self sufficient in gasoline, according to
    the Energy Ministry.
         The company may begin construction of a $7 billion
    refinery by the end of 2010 to help reduce imports of gasoline
    and diesel, according to a regulatory filing.

    For related news:
    Stories on Petroleos Mexicanos: 1232z MM <Equity> CN <GO>
    Stories on refineries: NI REF <GO>

    –With reporting by Jordan Burke in New York and Jim Kennett in
    Houston. Editor: Robin Saponar, Charles Siler

    To contact the reporter on this story:
    Andres R. Martinez in Mexico City at +52-55-5242-9283 or

  • #6678


    MEXICO Aging Pemex plants falter
    Mexico is struggling with modernizing its antiquated oil company

    Posted on Fri, Aug. 01, 2008 By Kevin G. Hall McClatchy News Service
    MINATITLAN, Mexico — Pungent smoke billows from aging petrochemical plants. Foul-smelling bluish water gathers in pools outside the walls.
    Fading paint announces the creaky Lzaro Crdenas refinery in Minatitlan, Mexico, a perfect metaphor for one of the world’s biggest and most antiquated state oil companies.
    Petroleos Mexicanos employs more than 147,000 people and has long operated as a state within a state, with its own hospitals, pensions and business operations.
    But Pemex has historically over-invested in a bloated workforce and under-invested in new or expanded refineries and sophisticated oil exploration and production. That’s evident in the rust, smog and environmental contamination here in the state of Veracruz and farther east in the state of Tabasco.
    A big reason for the state of affairs is that much of the national oil company’s earnings go directly to the Mexican treasury. Given the sorry shape of Pemex, President Felipe Caldern in April proposed a controversial energy overhaul that would give the company more control over its budget and allow private foreign firms to search for deep-water oil and to build and run refineries.
    Now the nation is in knots over whether and how to modernize the 70-year-old company and find new sources of oil before Mexico’s easy-to-extract oil goes dry.
    Mexico is already a net importer of gasoline — most coming from the United States — as it’s unable to refine enough oil to meet its demands. Within a decade, Mexico could compete with the United States for ever-scarcer barrels of imported oil.
    Oil production in Mexico — until recently the second-largest oil exporter to the United States, after Canada — is falling precipitously because output at the Cantarell offshore oil field is declining faster than expected.
    In fact, Pemex officials on Wednesday reeled in their output projections for the second time this year; they now say that Mexico will produce 2.8 million barrels per day this year, not the 3.1 million first forecast.
    It falls to Carlos Morales Gil, the director of exploration and production, to turn things around. But in an interview on the 41st floor of Pemex’s towering Mexico City headquarters, he warned, half jokingly, that it could take a century to tap Mexico’s vast but unproven oil reserves.
    Morales doesn’t have that much time, nor much room to maneuver. Restrictive rules govern contracting, and little of what Pemex earns can be reinvested. About 40 percent of federal spending in Mexico comes from oil earnings.
    In Morales’ best guess, there are 30 billion barrels of yet-unfound oil under the deep waters in Mexico’s portion of the Gulf of Mexico. U.S. companies have drilled hundreds of test wells in the U.S. deep waters, but Pemex has drilled just four to date in Mexico’s deep gulf waters.
    That’s where Mexico’s wrenching national debate over Pemex begins.
    Ever since President Lzaro Crdenas nationalized the oil industry in 1938 and kicked out Standard Oil, which much later became ExxonMobil, Mexicans have equated Pemex with national sovereignty. Allowing foreigners to extract oil in Mexico, even if on behalf of Pemex, is simply anathema.
    Two deep-water teams operate for Pemex now, and three more will arrive in 2010. With five operators, Mexico’s annual deep-water drill rate will grow to about 12 or 13 wells, still insufficient.
    ”I need to drill in deep waters about 1,500 wells in order to find these 30 billion barrels I mentioned, because not all will become producers,” Morales said. If the overhaul doesn’t progress and he must drill at current rates, “it implies it will take me 100 years to discover all the hydrocarbons that are there. Meanwhile, nobody benefits from them.”
    It’s not just oil that troubles Mexico. Pemex hasn’t built a new refinery since 1979. As the country’s economy and middle class grew, the six surviving Pemex refineries couldn’t keep up with the demand for gasoline.
    Mexico imported 360,700 barrels per day of gasoline in March. The energy ministry projects imports of nearly 500,000 barrels per day within seven years.
    Caldern’s proposal would allow Pemex to contract with private companies to build and operate refineries. The left-leaning Party of Democratic Revolution strongly opposes this idea, warning that big U.S. multinationals such as Halliburton soon would establish influence over Pemex.

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