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Mexico has been liquifying some of its oil assets, but instead
of deep-water blocks, it has mainly been oil fields closer to
shore. This has been quite disappointing for companies interested
in the country. Shell, Petronas, Total and Repsol have been some of
the first companies to bid, but President López Obrador has been
making it clear that there will be no new auctions for at least
three years. The potential is big for this Latin American producer,
but progress remains small as the country seems to keep most paths
of expansion closed. State-controlled Pemex is estimated to only
control marginally less than a third of the deep-water acreage
auctioned in the country since 2015. The first deep-water project
of Mexico to start producing will probably be the Trion, a joint
venture between Pemex and BHP, with the first barrels anticipated
in late 2024.
Meanwhile, Mexico has been increasingly relying on US imports of
oil products. Crude oil input of domestic petroleum refineries has
been declining only reaching to around 600 thousand b/d in 2018.
The country's refinery capacity has mainly been absorbing
domestically produced light crude oil. The capacity of all six
refineries in the country, owned and operated by Pemex, stands at
about 1.6 million b/d. Mexico has been importing much more motor
gasoline and other oil products, primarily from the US.
US refineries' appetite for heavy Mexican crude oil blends has
been quite strong, especially after the collapse of Venezuelan
production and exports due to the US sanctions.
The "National Refining Plan", an initiative announced by the
Mexican government in September 2018, targets to make the country's
energy independent by 2022. All Pemex's six refineries will be
upgraded and reconfigured, with a seventh to be constructed in Dos
Bocas with a design capacity of 340 thousand b/d.
President López Obrador recently presented the Business Plan of
Pemex by 2023. His government plans to support the company for the
first three years with a budget and tax reduction which will
provide the required capital to Pemex to invest. This will allow
the company to increase its production and become profitable,
contributing to the development of the Mexican economy. Over the
next three years, support of around 141 billion pesos (7.4 billion
USD) will strengthen the finances of Pemex until 2022. The global
market's response has been very positive, with the peso falling
further and indices based on Mexican stocks reporting losses.
Bankers have already been commenting that ratings both for the
company and for Mexico's sovereign debt will be downgraded any time
soon.
In terms of international shipments, Mexico has been loading
around 1,100 thousand b/d on ships with the majority of them
heading to the US according to data by IHS
Markit's Commodities at Sea. The North American country has
been absorbing almost half of the Mexican barrels exported on ships
with its market share standing at 48% in H1 2019. Overall, seaborne
exports increased by 8% between January and June 2019,
year-on-year. However, volatility has been dramatically high.
Posted 23 July 2019 by Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime, Trade & Supply Chain, S&P Global Market Intelligence
