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Mexico Doubles Down On Energy Independence Ambitions

The Mexican government’s plan to reduce the country’s dependence on imported gasoline and diesel risks swapping one addiction for another, with crude oil imports seen rising.

Bloomberg reports that state-owned Pemex had estimated that it would book a supply deficit of 47,000 bpd next year and 97,000 bpd in 2024 because of a boost in processing capacity at its Cangrejera refinery. The report was based on documents from the company that Bloomberg had seen.

Yet government plans also involve the construction of a whole new refinery, Dos Bocas, with a capacity of a whopping 340,000 bpd. The project, initially estimated to require investments of $8 billion, has faced delays and a 40-percent increase in cost estimates to $12.5 billion.

The refinery is expected to be inaugurated in July this year, but analysts think it may not be able to produce any gasoline in 2022 and even in 2023 and 2024.

“Unfortunately there’s a big discrepancy between the government’s expectations and reality,” Felipe Perez, an IHS Markit Latin America analyst, told Bloomberg, noting that it’s possible Dos Bocas might not produce fuels before López Obrador’s term in office ends at the end of 2024. 

Because of plans to increase domestic production of fuels, the Andres Manuel Lopez Obrador government also plans to phase out crude oil exports, it became clear last year.

The third-largest oil exporter in North America should start reducing exports beginning this year, with Asia likely to feel the cut most acutely as it is the destination for more than a quarter of Mexican crude oil exports.

At the same time, Mexico has not been importing any crude since 2018, when a 1.4-million-barrel cargo from the United States prompted criticism to the government from the current Mexican president.

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According to analysts, however, even with a suspension of oil exports, Pemex would still not be able to satisfy domestic fuel demand simply because it is not producing enough crude to process into gasoline and diesel.

By Michael Kern for Oilprice.com

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