Mexico President Plans Massive New Oil Refinery In Blow To U.S. Refiners

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Mexico’s President Andres Manuel Lopez Obrador has plans to build the country’s largest refinery with a capacity to produce 400,000 barrels of gasoline daily, Reuters reports, citing comments by Obrador during a meeting with businessmen in Monterrey.

The refinery would cost US$8 billion to build and construction could start soon, which would see it complete within three years. Though Reuters quoted Obrador as saying, “400,000 bpd of gasoline,” it added in its report that the comments did not made it clear whether he was referring to the crude oil processing capacity of the future facility or its gasoline production capacity.

Currently, Mexico’s refineries have a combined processing capacity of a maximum 1.6 million bpd of crude but, Reuters notes, it has been working at just 40 percent capacity since the start of the year because of accident-caused outages and operational issues. Pemex, which operates the six refineries, also exported more crude as prices improved internationally. In July, the state oil company produced 213,000 bpd of gasoline.

Earlier this year, Rocio Nahle, an adviser to Obrador and the most likely candidate for the Energy Minister job, said “In a three-year period, at the latest, we need to try to consume our own fuels and not depend on foreign gasoline.” This would be bad for U.S. refiners, who export the biggest portion of their production to Mexico. In the last few years, Mexican imports of gasoline and diesel have risen to more than 800,000 bpd, representing over 66 percent of domestic demand.

Mexico’s current oil production stands at about 1.84 million bpd, of which 60 percent is exported. At the same time, according to Reuters, the country imports around 1 million bpd of refined products.

“The commitment is to produce gasoline in Mexico,” Obrador said at the Monterrey meeting. “We want to produce gasoline because we have the raw material, we have crude oil.”

Regarding production, last month Obrador said all oil auctions would be suspended until contracts awarded by the previous government over the last three years are reviewed.

By Irina Slav for Oilprice.com