Given the surplus of fuel in Asia due to the COVID-19 pandemic, PEMEX is aiming to take advantage of cheap imports from China, South Korea and Japan. The Oil Price Information Service (OPIS) reported that PEMEX PMI is planning to import up to nine more fuel shipments in addition to two already purchased early in March, according to Reforma.
Total imports of 2.7 million barrels of gasoline, diesel or jet fuel are expected to reach the Salina Cruz refinery in Oaxaca, the only one of the National Refining System (SNR) in the Pacific Ocean. The medium range ships hired by PEMEX are scheduled to arrive to Mexico by April and have a capacity of between 280,000 and 300,000 barrels. No detailed information was available about which fuels are contained in these two shipments.
Cheap imports might become one less stress factor for the troubled NOC that doubled its loses from 2018 in 2019 and that now faces a sharp decline in oil prices. The global contingency gave also an opportunity for Asian markets to turn to Mexico to relieve their excessive fuel provision.
According to OPIS, PEMEX increased orders from Asia late in February and will likely continue in the short term. “We cannot know how much longer prices will drop and how long it will take for the Chinese economy to recover,” the agency has reported.
In 2019, the Salina Cruz refinery in Oaxaca recorded a production plunge of 24 percent, processing 125,104b/d and working at a 37.9 percent of its capacity, according to the latest Ministry of Energy crude oil processing report.
Despite the MX$25 billion (US$1.1 billion) investment announced for the modernization of the SNR, its six refineries are working at a modest production capacity of 36.1 percent, the lowest level in 30 years. The PEMEX Business Plan 2019-2023 contemplated a processing goal of 643Mb/d, which required the SNR to work at 39.2 percent of its installed capacity.
An intense program to improve the crude oil reception system and the primary plant distribution is ongoing at the Salina Cruz refinery, after facing a number of incidents. More investments in the port linked to the Tehuantepec Isthmus Railroad (FIT) project are also expected. Early in February four tenders were published to cover repairs of 157km of train tracks from the Port of Coatzacoalcos in Veracruz to the Port of Salina Cruz for the FIT project.
More troubles are likely to shake the markets even further after OPEC’s behemoth Saudi Arabia unveiled plans on Wednesday to dramatically ramp up oil production, raising the stakes of a lasting price war with non-OPEC leader Russia. Saudi Aramco was asked by the Saudi energy ministry to raise production to 13MMb/d, up from the 12MMb/d produced at the moment. If this trend keeps going, global oil prices will continue to plunge and more cheap fuels import form Asia will likely reach Oaxaca.