Pemex to invest $2,6B in Tula refinery; efforts may not be enough

Pemex Tula refinery

Mexico’s state-owned company, Pemex, is set to invest $2,6 billion in its Tula refinery, in order to decrease its dependance on foreign fuel imports; CEO of the company said on Wednesday. Investment would go to a coke plant within the refinery.

Firstly, Pemex expects the coking project will finish around 2023. According to Mexican officials, the investment would allow the company to process 90% of the fuel oil produced in the Tula refinery, consequently ramping up its gasoline production.

Secondly, Mexico has six refineries with a combined capacity of 1,6 million barrels a day; three of them have coking plants. Nevertheless, aging refineries have been operating at very low levels of production; less than 600,000 b/d, as of 2020.

Pemex refineries increasing output

Thirdly, under the Andres Manuel Lopez Obrador presidential term, Pemex has ramped up its gasoline output to 300,000 b/d. His goal is to end gasoline imports by 2024; currently, the country imports around 500,000 b/d of gasoline and 300,000 b/d of diesel.

Moreover, with the announced investment, Pemex would be able to “process 140,000 b/d of fuel oil to generate 42,000 b/d of gasoline; 78,000 b/d of diesel and 20,000 b/d of fuel oil.” Said Octavio Romero Oropeza, Pemex’ CEO.

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Pemex’s losses outweigh its gains

Nevertheless, the investment and other efforts by Mexican officials may not be enough to reach their goal. According to a report by S&P Platts, such efforts may just be “cosmetic” and will not solve the profound issues at Pemex’s refineries.

In fact, Gonzalo Monroy, CEO of consultancy GMEC. Quoted by Reuters, explained that the amount of investment was almost symbolic. “Those assets require at least $5 billion to them running at 95% of capacity.”

However, those are not the only issues; Pemex data shows that their losses in their refining segments outweigh the profits of its upstream business wing. In addition to corruption and conflict of interest, the refineries of Pemex are almost scrap metal worth.

Finally, there has been previous attempts of rehabilitating the assets, along with giants like Siemens, Valero and other majors. “When the international companies saw the state the machines were in, many told Pemex it was easier; also, cheaper and better to build new ones and sell the existing facilities as scrap metal.” A source said to S&P.

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