Feasible to build more refineries in Mexico, say experts

Given the current situation of the oil industry in Mexico, experts claim it's a good opportunity to increase the country's refining capacity
 Feasible to build more refineries in Mexico, say experts
PEMEX oil refinery in Minatitlán - File photo/REUTERS
07/05/2018
15:43
Noé Cruz Serrano
Mexico City
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Given the current situation in Mexico and the fact the country is importing large quantities of gas, it makes sense to build new oil refineries in the country, claim specialists of the energy industry.

At present, state-owned oil company PEMEX earns close to USD$ 40 billion for the domestic sale of fuel, and USD$ 20 billion in oil exports, which means the company increasingly sells less to the foreign market.

Ramses Pech, analyst at consulting firm Caraiva & Asociados, and Pablo Zarate, from FTI Consulting, agreed that its time for the private sector to get involved and increase Mexico's refining capacity with refineries capable of producing anywhere between 20, 000 and 100, 000 oil barrels per day. The cost of building these refineries ranges between the USD$ 600 million and USD$ 900 million but they claim the plants could be operational within two or three years.

Refining oil, according to them, is a better business now than exporting crude oil since the profit ratio is currently 2 to 1.

According to Pablo Zarate, refining is still a very important part of the oil business and pursuant to data from the main energy agencies, he considers hydrocarbon demand will continue increasing until 2030 or 2040.

“In many cases, gasoline consumption is expected to remain on the rise, and this is more than evident in the case of Mexico, where not a single serious analysis points at a drop in gasoline demand,” he explained.

In fact, most experts predict gas demand will have an annual growth of 3% or 4%.

According to the Ministry of Energy, they expect gasoline demand for vehicles to increase by 21.3% between 2017 and 2013. In particular, their forecasts say Premium gas will have an annual average growth of 1.2% while Magna (regular) gas, of 1.6%.

Lack of infrastructure

For Pech, the main issue in increasing Mexico's refining capacity with new industrial complexes is the lack of oil and logistics infrastructure but he considers there are two possible solutions for the first part of the problem: stop exporting or purchase light crude oil, which the United States sells at low prices.

The expert considers this is a situation Mexico could take advantage of without losing sight of the future oil panorama.

For Zarate, Mexico either invests in improving its refining capabilities and logistics or promotes the necessary conditions to attract investments and let investors set the pace.

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