PEMEX Moves Forward With Refining Strategy

PEMEX reported losses from refining of MX$177.857 billion (US$6.56 billion) in 2022, an MX$5.137 billion (US$285.77 million) increase compared to 2021. Rating agencies such as Moody’s have repeatedly signaled that PEMEX’s refining strategy is flawed and contributes to the negative financial outlook and credit ranking for the company.

Despite lackluster refining results, the administration has bet heavily on investing in strengthening the National Refining System (SNR). The landmark project, the Olmeca Refinery in Dos Bocas, has received billions more in funding than initially predicted. Recently, the government approved MX$47.234 billion (US$2.362 billion) more for the refinery’s construction. this provision will increase the refinery’s costs to MX$313 billion (US$15.65 billion), a 75% increase from the original US$8.918 billion budget. However, President López Obrador defended that the cost of the refinery will be US$11.65 billion; and according to sources contacted by El Universal the recently-approved US$2.234 billion are part of this previously authorized budget.

The Superior Audit of the Federation (ASF) found irregularities during the construction of the refinery in 2021. According to the ASF, these anomalies could amount MX115.48 million (US$5.774 million) in overpayments. The ASF reported payments for contracts that ended up being terminated, abnormalities in contracts and irregularities in assigning contracts. Rocío Nahle, Mexico’s Minister of Energy, said that SENER will liquidate the amount over the next 30 days and pointed out that this represents 0.07% of the resources used for the construction in 2021. She added that on July 1, 2023, the total cost of Dos Bocas will be revealed and that the first barrel of gasoline will be produced.

Following delayed construction, López Obrador and Nahle promised that the Dos Bocas Refinery will go online in July 2023. Nahle had previously delayed the launch of operations at Dos Bocas to December 2022.

The López Obrador administration also invested in the purchase of the Deer Park refinery in Texas, which, according to Octavio Romero, CEO, PEMEX, has yielded solid results. “The profits at the end of the year are estimated to reach US$1 billion. This implies that PEMEX not only recovered its investment in less than a year but also obtained a profit of US$400 million,” reported Romero.

The addition of the refinery has also helped to increase national refining production. “When we started (the administration), only 600Mb/d were processed. We rehabilitated and invested in our refineries and went from 600Mb/d to 800Mb/d. However, if we consider the production of Deer Park, which PEMEX already owns, we are close to 1.1MMb/d,” Oropeza said.

PEMEX aims to produce 244Mb/d of fuel by 2023, of which 118Mb/d are gasoline, 99Mb/d diesel and 27Mb/d jet fuel. The company aims to increase refined fuel production to 262Mb/d in 2024 and maintain crude oil processing capacity of 298Mb/d.