Two of Mexico’s oil refineries are dying

Two of the six refineries controlled by Mexican Petroleums (PEMEX) are operating at critical levels and will not be able to recover before Mexico’s next government administration.

President-elect Andrés Manuel López Obrador

has acknowledged that oil production is dropping and that the problem needs to be addressed immediately in order to avoid further losses. He has plans to modernize all six refineries and build two new ones.

According to the National Commission of Hydrocarbons , the Madero and Minatitlán facilities are currently operating at a minimal capacity and their contribution to meet the demand for gasoline in the country is growing weak for the Magna type and null for Premium .

For both cases, the incoming federal government will have to work from scratch, according to experts.

Furthermore, these facilities have undergone a full-service maintenance to uphold their production capacity since 2013 , but have since made a progress of barely 31.7% and 34.6% each.

The full-service maintenance programs for both refineries have a cost of 15,000 million pesos , a part of which will have to be absorbed by the incoming administration, according to experts from the oil industry.

The fiscal resources timetable indicates that, by 2019 , 2,012 million pesos will have to be disbursed in order to keep the maintenance program going at the Madero refinery, and 2,013 million for the Minatitlán refinery . The financial commitment will have to be assumed by the new administration.

Ramses Pech, from the Caraiva and Associates firm, and George Baker, consultant for Mexico Energy Intelligence in Houston

, Texas , have agreed that the refineries operated by PEMEX are working at a very low capacity because “there is not enough crude oil to keep them busy.”

They stressed that the refineries are “strangled” deliberately each time authorities from Mexico’s energy sector decide to destine larger oil volumes to export markets instead of the national refining system.

“They want to take advantage of the Mexican oil’s price growth, even if it means sacrificing domestic refining,” stated Pech Razo.

So far this year, refineries have barely received 640.6 thousand barrels a day in regard to the 1,247,000 barrels exported , “nearly twice the domestic production.”

As a matter of fact, plant capacity for the Madero and Minatitlán refineries barely reached a 17% in the month of May , according to information provided by the CNH.

Both analysts agree that PEMEX’s current refining strategy is not sustainable. The incoming administration will require a larger amount of crude oil in order to reactivate the refineries. “They are leaving President-elect Andrés Manuel López Obrador with a difficult choice. He will either have to continue exporting the same amount of crude oil or reduce sales to refine more oil locally,” Baker indicated.

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