Scott Squires, Bloomberg News
MEXICO CITY
EnergiesNet.com 04 25 2024
Valero Energy Corp. expects fuel demand to grow in Mexico, even with the flagship Dos Bocas refinery set to ramp up domestic production and the presidential frontrunner proposing a shift to more green energy.
The Texas-based refiner’s Mexican subsidiary sees opportunity in exporting more fuel into the domestic market because the country cannot meet demand with local refining capacity alone, according to the company’s top local executive.
“Even with added capacity from the new Dos Bocas refinery, Mexico cannot generate enough diesel, jet fuel and gasoline to meet demand,” Valero Mexico General Director Carlos Garcia said in an interview Tuesday on the sidelines of a Council of the Americas event in Mexico City. “There’s always going to be a need to import fuel into Mexico.”
Mexico’s outgoing president, Andres Manuel Lopez Obrador, has made “energy sovereignty” a pillar of his legacy, spending billions to grow refining capacity at state oil company Petroleos Mexicanos. Pemex estimates that Dos Bocas — its marquee facility in Tabasco state, which is also known as the Olmeca refinery — will produce around 340,000 barrels per day by September, when it’s due to begin operating at full capacity.
Even with added domestic supply, Mexico will still face a roughly 500,000 barrel per day fuel deficit to meet current market demand of around 1.3 million barrels per day, Garcia said. He expects demand will continue to grow by 2% to 3% per year or more as US companies ramp up operations with their southern neighbor, part of a trend known as nearshoring.
“Pemex will always have the home team advantage, and whatever they produce, they’re going to sell it,” Garcia said. “Where we want to play is in Mexico’s import market.”
A company spokesman declined to comment on how much Valero planned to grow its Mexico imports. Valero operates more than 260 gas stations across 20 states in Mexico, and plans to expand as the market allows, the spokesman said.
The US refiner’s Mexico and Peru operations contributed about $6.4 billion in revenue last year, approximately 4% of the company’s 2023 total, according to its annual report to shareholders. Valero is due to report first quarter earnings before markets open on Thursday.
Energy policy is one of the key issues in the campaign to replace Lopez Obrador, who is nearing the end of his six-year nonrenewable term. His party’s chosen successor, Claudia Sheinbaum, is fleshing out her plan to speed up Mexico’s green energy transition.
If the energy engineer wins the June election, she proposes to spend around $13.6 billion on new projects to boost green power generation while still adding gas-burning plants. She also aims to push debt-laden Pemex to embrace cleaner technologies including lithium extraction, hydrogen and electric vehicle infrastructure.
“Electromobility in Mexico is going to have its place, especially in public transit,” Garcia said in the interview. “But I don’t see Mexico having the resources to electrify all vehicles in the country.”
Instead, Garcia says Mexico could eventually spur more use of cleaner but pricier green fuels like ethanol or renewable diesel — produced from animal fat and cooking grease — via tax incentives or subsidies.
The government will also be up against fiscal constraints when the next administration takes over. Mexico faces its largest budget deficit since the 1980s as AMLO, as the president is known, spends big during his final stretch in office. So the speed of Sheinbaum’s green shift will hinge on its rank among other funding priorities.
“Every country in the world is moving at a different pace in their energy transition, because they’re in a different place in their development,” Garcia said. “Mexico is not quite there, but Sheinbaum wants to accelerate that.”
–With assistance from Carolina Gonzalez.
bloomberg.com 04 24 2024
