Pemex seeking partners for refinery upgrades

Mexico's state-owned oil company Pemex is seeking private partners for three major refinery upgrades that will allow it to convert more heavy crude into higher-value fuels like gasoline, a company executive said on Tuesday.

Mexican construction firm ICA reported that its subsidiary ICA Fluor signed a one billion dollar contract with Pemex to modernize Tula refinery in Hidalgo.

The contract covers engineering services, procurement and construction related with the project to use waste, that will help the refinery increase its processing capacity from 315,000 barrels to 340,000 barrels per day. The project is expected to be concluded by the second quarter of 2018, ICA added.

Pemex estimates required investment for the construction and installation of coking units at its Salina Cruz, Tula and Salamanca refineries at US$12.3 billion.

"We think these projects can be completed by means of partnerships with third parties," said Juan Marcelo Parizot, Pemex's head of marketing for its newly-created Industrial Transformation division.

"The goal is to assimilate the best operational and management practices," he said, adding that partnerships would share risks and rewards as well as lower the amount of capital that Pemex would have to invest upfront.

Like most large oil companies, Pemex has seen its revenues slide dramatically as crude prices plunged by more than half since last year.

The additional three coking plants would allow Mexico, which increasingly produces heavy crude, to generate more valuable fuels like gasoline and diesel, and fewer barrels of less-desirable fuel oil.

Parizot said the projects would eventually increase fuel production by more than a fifth, while improving profit margins by about US$6 per barrel of crude oil processed.

He declined to say what kind of partnerships Pemex would employ for the refinery upgrades, or when the projects might be tendered.

Due to lack of sufficient domestic capacity, Mexico currently covers about half of its gasoline needs through imports.