Mexico’s state-owned Petróleos Mexicanos, the second-largest exporter of crude oil to the U.S. after Canada, said in late December that it will slash its export volumes in 2022 and eliminate them completely in 2023. The plan is premised on Pemex’s expectation that, with increased utilization of the company’s six existing refineries and the impending start-up of a new one, it will need every barrel of the Maya, Isthmus, Olmeca, and other varieties of oil it produces. While at first glance it may seem that Mexico phasing out exports of crude would pose a major challenge to some U.S. refineries, there’s good reason to believe that in reality it won’t. In fact, as we discuss in today’s RBN blog, there may be less to Pemex’s planned export phase-out than meets the eye.
For most of the past several years, there have been steady — and, for Mexico, disappointing — trends at Pemex, including:
- Declining crude oil production: 1.9 MMb/d, on average, in each of the past three years, according to Pemex, compared with 2.1 MMb/d in 2018, 2.2 MMb/d in 2017, and 2.5 MMb/d in 2016.
- Falling refinery utilization: Less than 50% currently, compared with about 90% for U.S. refineries.
- Sinking output of refined products: 231 Mb/d of gasoline and 116 Mb/d of diesel, on average, in the first 11 months of 2021, compared with 325 Mb/d and 216 Mb/d, respectively, five years ago.
Oh, and rising red ink: Pemex’s debt tops $100 billion, higher than any other energy producer on the planet. One metric that has held up for the company is crude oil exports (green layer in Figure 1): Pemex exported an average of just over 1 MMb/d in the January-through-November period in 2021, with more than 80% of those volumes being Maya, the company’s benchmark heavy, sour crude, which has an API of 21 degrees and 3.5% sulfur content. (Pemex tends to retain most of its lighter grades — Isthmus and Olmeca — for its six domestic refineries. More on these refineries in a moment.)
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