Latin America’s beleaguered refineries slashing runs

The oil market collapse is accelerating a downturn in Latin American refining as mostly state-owned operators scramble to cope with virus-gutted demand and storage constraints, according to local downstream officials surveyed by Argus .

The region's aging refinery fleet is currently running at about one-third of its aggregate design capacity of roughly 7.5mn b/d. Many refineries were already underutilized by weak economics and technological lags long before March, when oil prices crashed and strict Covid-19 pandemic restrictions wiped out most fuel demand, particularly for gasoline and jet fuel .

Among the refineries that remained active before the crisis hit, some are still churning out diesel to meet agricultural sector and distribution needs. LPG demand to meet higher residential consumption during lockdowns is generally holding up too. And even some gasoline and asphalt demand is ticking back as economies start to revive.

Economics not always the driver But operational decisions in the region's jobs-creating refining sector are not always shaped by commercial considerations. Unable to compete with more efficient US Gulf coast refiners, Mexico's state-owned Pemex has only been using around half of its 1.6mn b/d fleet in recent years, while the government remains wedded to a quixotic 340,000 b/d greenfield project in Tabasco. Overall throughput is now around 600,000 b/d.

Colombian state-controlled Ecopetrol, normally a bustling refiner, recently cut runs its two main plants, 250,000 b/d Barrancabermeja and 165,000 b/d Cartagena, to nearly half rates. Next door in US-sanctioned Venezuela, years of almost no maintenance or investment have broken state-owned PdV's entire 1.3mn b/d refining system . The company's overseas withdrawal has orphaned projects across the region, including more than 400,000 b/d of capacity in the Dutch Caribbean.

Further south, PetroEcuador's 110,000 b/d Esmeraldas plant has been prone to accidents following a defective upgrade under the previous government. Now Esmeraldas, as well as the 40,000 b/d Libertad and 20,000 b/d Shushufindi plants, are shut down on demand loss and replete storage, followed by weather-related crude pipeline ruptures and FCC damage in early April.

Southern Cone Brazilian state-controlled Petrobras' 13 domestic refineries are running at around 60pc of capacity , which is generally considered a technical minimum level. Oil union officials say some of the plants, such as the 208,000 b/d Araucaria, have shut in units, leaving them at an effective rate of just 30pc. But Petrobras says export demand for its low-sulphur marine fuel remains buoyant.

The downstream outlook is less clear in Argentina , where the private sector plays a prominent role and the government routinely controls oil pricing. State-run YPF, which accounts for more than half of the nearly 600,000 b/d of total refining capacity, has halted its 25,000 b/d Plaza Huincul plant, while utilization at the 189,000 b/d La Plata and 105,000 b/d Lujan de Cuyo facilities is around 40pc.

Raizen, a joint venture between Shell and Brazil's Cosan, has shut its 110,000 b/d Buenos Aires refinery. Throughput at Axion's 95,000 b/d Campana refinery Buenos Aires province is 70pc-75pc. Trafigura said its 30,500 b/d Bahia Blanca refinery in Argentina will be cut to 50pc in May with a focus on exports. Refiners could further dial back runs if the government strikes a deal with oil-producing provinces to prop up the domestic crude price.

Elsewhere in the agriculture-rich Southern Cone, crude importers are maintaining refinery operations for now. Chilean state-owned Enap's Aconcagua and Bio Bio plants with 210,000 b/d of combined capacity are running at around half capacity. Uruguay's state-owned Ancap is processing some 40,000 b/d at its 50,000 b/d La Teja refinery. Bolivia's state-owned YPFB, mainly a natural gas producer, is using half of its 60,000 b/d of capacity.

Peruvian state-owned PetroPeru's 65,000 b/d Talara refinery was already closed since late last year for a long-delayed upgrade to meet tighter domestic fuel specifications. Spain's Repsol is still running its 117,000 b/d La Pampilla refinery in Peru, but the firm has not disclosed its current run rate ahead of its quarterly earnings.

In the Caribbean, the Dominican Republic's 34,000 b/d oil refinery suspended operations on the demand loss. Jamaica is running around 20,000 b/d through 35,000 b/d PetroJam.

Cuba's state-owned Cupet, which relies mostly on Venezuelan feedstock for its 65,000 b/d Cienfuegos refinery, has not disclosed recent throughput.

By Patricia Garip

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