Maya, Mexico’s flagship heavy crude, has been a key staple in the diet of U.S. Gulf Coast refiners for a long time, and it has faithfully served as a price benchmark for nearly all heavy crude oil traded along the U.S. Gulf, and points beyond. Maya’s price, relative to lighter benchmark grades such as Louisiana Light Sweet (LLS) or Brent, provides ready insight into the profitability of heavy oil (coking) refiners. But production of Maya peaked in 2004 and has declined considerably since then, raising questions about its continuing efficacy as a price benchmark. Now it’s come to light that a component of the Maya price formula was changed effective January 1, 2017. Although the change—related to the formula’s fuel oil price component—might be viewed as a relatively minor tweak, it raises new questions about this important heavy oil price benchmark. Today we begin a two-part series on Maya crude, the new price formula and its potential effects.
Mexico currently produces about 2.2 million barrels a day (MMb/d) of crude oil, which makes it the 12th largest producing country in the world. P.M.I. Comercio Internacional S.A. de C.V. (PMI) is the crude oil marketing entity of state-controlled Petróleos Mexicanos (PEMEX) and manages exports that currently comprise about one-half of production, ~1.1 MMb/d. PMI exports four distinct quality grades of crude oil, ranging from Altamira (an asphalt grade) and Maya on the lower end of the quality spectrum, to Isthmus in the middle, and Olmeca at the higher end. PMI reports that its typical customer base includes a total of about 25 refiners in the Americas, Europe, and the Far East.
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Maya is a heavy, high-sulfur grade—22 degrees API gravity (see Don’t Let Your Crude Oils Grow Up To Be Condensates for more on API gravity) and 3.5% sulfur—that makes up about 49% of total Mexican production and 78% of total Mexican crude exports. PEMEX’s own refineries largely lack the upgrading capacity to effectively process Maya; historically its natural market and primary destination has been coking refineries on the U.S. Gulf Coast. (See Complex Refining 101 for more on refinery upgrading processes.) Despite the fact that Maya production accounts for just under half of Mexico’s oil output, the heavy crude is produced within a relatively small area. “True” Maya crude is produced from the Cantarell Field, a once highly productive offshore area in the Bay of Campeche (below the inset in Figure 1). Cantarell was discovered in 1976 after a fisherman (the field’s namesake) reported an oil sheen on the water’s surface. According to the U.S. Energy Information Administration (EIA), production of crude oil from the Cantarell Field averaged approximately 228 Mb/d in 2015 (red slice in Figure 1 pie chart), which was about 90% below the peak production level of 2.1 MMB/D reached in 2004 (and 29% lower than 2014). The Ku-Maloob-Zaap (KMZ) field located near Cantarell is another heavy production source; its production (~0.9 MMb/d in 2015; yellow slice), which is blended into the Maya stream and not sold as a discrete grade, has been steady or climbing in recently years, helping to offset the decline in Cantarell Field production.
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About the song
"He Ain't Heavy, He's My Brother" was written by Bobby Scott and Bob Russell. The song was originally released by Kelly Gordon in early 1969, but it was The Hollies’ release of the song as a single in September 1969 that made it a worldwide hit. “He Ain’t Heavy” was the second song on side two of the U.S. release of The Hollies’ ninth studio album of the same name. The song was recorded at Abbey Road Studios in London between June and August 1969, with Ron Richards producing. It went to #7 on the Billboard Hot 100 Singles chart. Personnel on the record were: Allan Clarke (lead vocal, harmonica), Tony Hicks (lead guitar, backing vocals), Terry Sylvester (rhythm guitar, backing vocals), Bernie Calvert (bass, keyboards), Bobby Elliott (drums), and Elton John (piano).
The album He Ain't Heavy, He's My Brother was released in the U.S. in December 1969. It was released in the UK one month prior, under the title Hollies Sing Hollies. The re-named U.S. version included the hit single, which was not included on Hollies Sing Hollies. It would be the first Hollies album released since the departure of Graham Nash in late 1968. The album went to #32 on the Billboard Top 200 Albums chart.
The Hollies are a British rock band formed in Manchester in 1962 by Allan Clarke and Graham Nash. They have released 21 studio albums, 22 compilation albums, seven EPs, and 67 singles. They have had 21 singles chart in the Billboard Hot 100 and 13 albums chart in the Billboard Top 200. They are members of The Rock and Roll Hall of Fame and Vocal Group Hall of Fame. The band still tours with founding members Tony Hicks and Bobby Elliot, joined by touring musicians.
