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Major Products Draws Send Oil Prices Higher

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Pemex Plans Cut In Oil Exports In 2022

Mexico’s Pemex plans to reduce the amount of oil it exports next year and use it domestically instead, Bloomberg has reported, as the country seeks to reduce its dependence on expensive fuels by processing more oil locally.

Mexico is the third-largest oil exporter in the Americas after the United States and Canada, according to the Energy Information Administration. The main destinations for its crude are its northern neighbors in North America and China, India, and South Korea, as well as European countries. A cut in exports could make some of these importers look for alternative suppliers.

Asia could feel a particularly severe blow, according to Bloomberg. It accounts for more than a quarter of Mexican oil exports, and refiners in South Korea and India are particularly vulnerable to the cuts, which Pemex has signaled will be smaller for European and U.S. buyers, going back on plans to move away from its biggest market in the United States.

Increasing domestic refining capacity was one of President Andres Manuel Lopez Obrador’s campaign promises and part of government plans to restore the dominant market position of Pemex, which is the world’s most indebted oil company. The plan envisaged the construction of a new refinery in the Tabasco state, initially expected to cost $8 billion. Later calculations, however, showed it could end up gobbling up $12.4 billion.

Apart from cost overruns and delays in the timeline, the Dos Bocas refinery was earlier this year found to be located in a protected area of mangroves which Pemex vowed to protect and not “be allowed to develop projects and activities in areas” where the mangroves grow.

Besides the Dos Bocas project, Pemex is also planning a downstream expansion abroad. The company has struck a deal to buy the Houston Deer Park refinery from Shell, prepared to spend $1.6 billion on the deal.

By Irina Slav for Oilprice.com

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