Pemex to acquire full interest in Deer Park refinery

Mexico's national oil company Pemex has agreed to buy Shell's interest in the pair's joint venture 340,000 b/d refinery in Deer Park, Texas.

A nearly $600mn unsolicited offer will let Pemex acquire Shell's 50.5pc stake in the refinery, pending regulatory approval. Shell retains the site's chemicals complex.

Pemex would acquire full ownership of a complex US Gulf coast refinery and a steady processor of Mexico's Maya heavy sour crude as part of a policy directed by Mexico's president Andres Manuel Lopez Obrador to satisfy more the country's fuel demand from Pemex refineries.

The sale continues Shell's efforts to trim its global downstream business, though at a location it did not plan to divest. The companies expect to close the sale by the end of the year.

Lopez Obrador has pursued an energy independence program to slash the country's fuel imports and boost domestic production. The project has included a new 340,000 b/d Dos Bocas refinery already facing cost and feasibility concerns, and significant work at the country's six existing refineries operating well below capacity.

The Deer Park acquisition is a twist on these ambitions for a Pemex-supplied Mexico. The country is consistently a top importer of US gasoline and diesel by a combination of waterborne, rail and truck deliveries. Mexico's average US gasoline imports in 2019 alone, at about 470,000 b/d according to data compiled by the US Census Bureau, was greater than the average exports to all other destinations for that year — combined.

A Pemex Deer Park refinery taps a well-operating complex facility for supply, even if that supply comes from the Texas coast.

Shell meanwhile has sought to reduce its downstream operations to hubs where the oil major can leverage a more integrated chemicals and trading portfolio. Deer Park would have been one of those locations.

The $589mn salw price, with a combination of cash and debt, is nearly double what Shell received for its 145,000 b/d Puget Sound Refinery in Anacortes, Washington. That complex but smaller facility supplies fuels into a more challenging regulatory environment.

By Elliott Blackburn