Pemex: Three refinery overhauls still planned

Mexico's state-run Pemex expects the incoming administration to stay the course on plans to overhaul three of the country's six refineries in coming months.

President-elect Andres Manuel Lopez Obrador is set to take office on 1 December, and his expected energy minister Rocio Nahle has said that all six refineries should undergo upgrades, at a total cost Ps38bn ($2bn).

Lopez Obrador began a separate press conference to announce members of his energy team after the end of Pemex's earnings call today.

Mexico has revamped three of its six refineries — Minatitlan, Madero, and Cadereyta — but the other three —Tula, Salamanca and Salina Cruz — still do not have the capacity to process much of the heavy crude that represent 57pc of Mexico's crude production.

"Tula, Salamanca, Salina Cruz — we have heard from [the incoming administration] that they are going to keep those projects," Jorge Martinez, deputy director of fuel marketing said on an earnings call today.

Plans to reconfigure these three refineries have been in the company's plans before. Political and primarily financial problems — including the 2014 plummet in oil prices — prevented the company from close to $2bn per refinery to make them able to process more heavy crudes.

No details were given on the time-frame to start the process, although 315,000 b/d Tula is ahead of the other two as Eni is already working in upgrading one of the plants.

Nahle has also vowed to build a new 300,000 b/d refinery in Campeche or Veracruz.

Martinez said that a new refinery has been analyzed before.

"We have considered a new refinery in the past," he said. "In the current business plan, because of the available resources, the current administration decided to postpone that one."

One of the main problems for the new refinery is the investment needed, estimated by the industry in at least $15bn, although Nahle and Lopez Obrador have said it would be possible with $8bn.

Pemex's chief financial officer David Ruelas said that they have not spoken with the incoming presidential administration yet.

"We do not have any answers right now [about the new refinery] because we have not talked to them yet," Ruelas said.

Ruelas added that Pemex 's plans to request at least $10bn in its 2019 budget, or possible 10-15pc more. The new administration will weigh in on the budget proposal in December.

Crude throughput down

While the new administration makes plans, Pemex's operating numbers continue to fall.

State-run Pemex's crude oil throughput averaged 704,000 b/d in the second quarter, 22pc less than the same period of 2017, Pemex said on an earnings call today.

Pemex's chief executive Carlos Treviño had said that he expected the company would process 900,000 b/d of crude in the second quarter, leaving the company 196,000 b/d short of its goal. Totals through May already indicated that the company would not meet its goal.

Pemex reported a notable decrease in the heavy oil processed in the second quarter as it fell by 34pc to 259,000 b/d from 396,000 b/d.

Martinez from Pemex's fuel marketing division said the 190,000 b/d Madero and 285,000 b/d Minatitlan are having problems coming back from their maintenance programs that occurred late in 2017 and ended in the first quarter of this year.

"In Madero we found some problems with other plants that we are fixing," he said.

Refinery capacity usage decreased to 43pc of the total capacity installed from 55pc in the second quarter of last year.

As a result, Pemex's total production of refined products in the second quarter of 2018 fell by 20pc to 740,000 b/d from 923,000 b/d in the April-June period of 2017.

LPG had the biggest production decline as output decreased by 31pc to 12,000 b/d.

Gasoline production including regular and premium diminished by 21pc to 235,000 b/d in the period.

Pemex reported a net loss of $8.2bn in the second quarter, compared with net income of $1.7bn in the same quarter of last year. The decline comes as Pemex said it is now focusing on financial results over only production volumes. The company's total sales increased 35pc to $21.9bn.