Sheky Espejo, Platss S&P Global

MEXICO CITY
EnergiesNet.com 10 19 2023

Mexico’s state oil and gas company Pemex, which the administration of President Andres Manuel Lopez Obrador has tasked with increasing the production of fuel to stop the country´s dependency on imports, is struggling to meet its own goals.

The low may be temporary but it shows how hard it is for Pemex to keep its multiple commitments, observers told S&P Global Commodity Insights, and it comes in a time of management changes.

In the week ending Sept. 29, the level of utilization at Pemex’s six refineries was at 38%, processing only 655,000 b/d, its lowest level since July 2022, according to data from the Energy Secretariat, or SENER. Gasoline production was only 212,000 b/d from a peak of 365,000 b/d at the beginning of May, while diesel output was only 66,000 b/d, or half what it had been in the same week for the last four years. The government has pledged to double down on the financial support to optimize Pemex’s six refineries to stop the country’s dependency on imported fuel, mainly from the US, but Pemex will only invest $9.2 billion, or 9.2% of the roughly $11.5 billion it has estimated in capital expenditures for 2023 in its refining business, according to a September presentation to investors. According to observers, each of the six refineries needs an investment of roughly $50 million.

The government’s strategy to boost local production includes the acquisition of the 50% it did not already own in Deer Park, a refinery in Texas it had operated in a joint venture with Shell, and the construction a new 340,000 b/d refinery in the state of Tabasco.

The government has criticized the lack of investment in the refining system from previous administrations, said Gonzalo Monroy, CEO of consultancy GMEC in Mexico City “but the lack of investment persists.” Monroy pointed out that without proper maintenance it is very hard to maintain control over the facilities.

During September, the number of shutdowns at the processing plants reached 45, the highest since July 2022, SENER data shows. Monroy also noted that in recent months local news outlets have uncovered the debt Pemex has with its service providers, which include large international companies.

Adrian Duhalt, a research scholar at the Center on Global Energy Policy at Columbia University in New York, told S&P Global that the poor utilization in September shows how hard it is for Pemex to maintain its refinery system operating, but noted that the company is also juggling to meet production targets on other fronts.

“The company has a lot to deal with — from crude oil and refined products to petrochemicals and fertilizers, and many wonder if it has the resources to pull it all off,” Duhalt said.

^{Energy secretary steps down}

The bad results happen as Mexico’s energy secretary, Rocío Nahle García, a key figure for the refining sector, has stepped down to resume her political career. Nahle García presented her resignation on Oct. 13 to compete for the governorship of the state of Veracruz in 2024. Nahle García had been appointed by Lopez Obrador to lead the construction of the new refinery and supervise the modernization of the six existing ones. Ahead of her resignation, the president praised the work of Nahle García highlighting the quick construction of the new refinery, located in the port of Dos Bocas, which was inaugurated in July although no commercial operations have started. S&P Global analysts estimate that production at Dos Bocas could begin at the end of 2024.

On Oct. 16, Lopez Obrador informed on social media that he had chosen Miguel Angel Maciel Torres as the new energy secretary. Marciel Torres, who has served as undersecretary of hydrocarbons at SENER since 2019, was a retired Pemex official before the victory of Lopez Obrador in the 2018 election. Marciel Torres will serve in the position until July 2024, when a new Mexico president is to be elected.

spglobal.com 10 17 2023