It Ain't Heavy, It's My Maya - Impact of Changes to the Mexican Heavy Crude Benchmark

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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