Mexico to tender new refinery by March: AMLO

Mexico will tender construction of a new refinery in Dos Bocas, Tabasco, next year as part of the country's national refining plan that aims to triple gasoline production.

"We have the projects. We are going to start tendering the refinery by March at the latest," said President Andres Manuel Lopez Obrador during the launch of the national refinery plan on 8 December.

Lopez Obrador, known as AMLO, took office on 1 December, pledging to reboot the country's refining sector following the failure of the 2014 energy reform to lower gasoline prices at the pump.

State-owned Pemex's six refineries have a total crude processing capacity of 1.615mn b/d, but average refining capacity for this year ran at 38pc. This requires Mexico to import 80pc of the fuels consumed, energy minister Rocio Nahle said during the event.

Construction of a new $8bn refinery in Dos Bocas, Tabasco, will be tendered in six packages from March, with the finished 340,000 b/d capacity project expected to process crude of 22° API. Mexico's existing refineries are designed to refine mostly light crude. Mexico's heavy sour Maya crude has a gravity of 22° API and 3.3pc sulfur.

The new refinery would count 17 processing plants and 93 storage tanks and be connected to the maritime terminal in Dos Bocas.

The location of the 566ha (1,400 acre) refinery complex, close to existing pipelines that connect to production in the Tabasco bay and Campeche sound where 80pc of domestic production is sourced, is "ideal," Nahle said during the event.

AMLO confirmed that more of Mexico's increasingly heavy domestic crude production would be sent for refining in Dos Bocas, rather than exported.

Oil revenues represented 8pc of government income in 2016, down from a peak of 34pc in 2012. Ratings agency Moody's Investors Service has warned that the plan to halt exports would deprive the government of nearly 2pc of GDP in forgone revenue, forcing it to raise taxes or abandon its pledge of fiscal discipline.

AMLO has pledged to complete construction of the refinery within three years, an ambitious target say local analysts, given Pemex's history of project schedule and cost overruns.

The second prong of the refinery plan consists of extensive maintenance works to the existing six refineries in order to increase gasoline production to 600,000 b/d by mid-2020, almost three times existing production.

"The lack of maintenance, the lack of investment and operational deficiencies have resulted in a high rate of unplanned stoppages, low utilization and, in consequence, low output," said Nahle.

In the third quarter of this year, gasoline production increased by 3.5pc to 209,000 b/d from the same quarter of 2017, but decreased by 21pc in the year to date to 211,000 b/d.

Pemex processed 640,000 b/d of crude in its refineries in the third quarter, down by 6,000 b/d or 1.1pc, from the same quarter of last year. Pemex's total refined products output during the third quarter of this year decreased by 3.3pc to 639,000 b/d from the same last quarter of 2017, and by 22pc to 661,000 b/d in the year to date, from January to September.

Pemex's previous head of the downstream unit, Carlos Murrieta, said in October that running the six refineries at full capacity would be harmful to the company's focus on value over production. Running at full capacity would involve the production of a lot of fuel oil, something he characterized as "completely uneconomical."

Specific refinery upgrades include maintenance of the processing train at the Salamanca refinery in order to increase utilization rates to 75pc by the end of next year. Another is replacement of the catalytic converter and modernization of the Mina 1 plant at the Minatitlan refinery in order to increase output by the middle of next year.

The Madero refinery, out of operation for the past year, is expected to restart initial operations in January next year, with the second refining train to be put into service next November.

Pemex plans to carry out extensive equipment maintenance and increase processing capacity at the Cadereyta refinery, while the Tula refinery H-Oil plant — currently abandoned — will be rehabilitated and a new program developed to process residuals.

Finally, at the 330,000 b/d Salina Cruz refinery that suffered extensive damage during a fire in June last year, Pemex plans to rebuild the crude receiving and distribution system in order to achieve a 70pc utilization rate by December 2019.

Pemex also plans to improve power plants and electrical infrastructure at each of the refineries, as well as maintain and replace existing control system equipment, compression systems, pumps, turbo-generations and cooling towers.

The energy ministry will oversee the refinery tender process as well as upgrades to the existing refineries, said AMLO.