Deer Park Refinery Bucks Trend Amid PEMEX's Refining Struggles

PEMEX’s refining focus does not seem to be yielding the expected results. Still, while its subsidiary, PEMEX Transformación Industrial, responsible for operating the NOC’s six refineries, reported losses of US$5 billion from January to September of last year, the Deer Park refinery, located in Texas, United States, expects to close 2023 with profits of US$711 million, according to PEMEX’s latest financial report.

After 30 years of partnership with Shell, PEMEX, announced in 2021 the unexpected total purchase of Deer Park for US$1.5 billion, including debt, which was completed in 2022. This move was part of President Andrés Manuel López Obrador plan of sovereignty in energy, rooted on terminating fuel imports and the construction of a new refinery, Dos Bocas, which cost US$16 billion.

PEMEX began reporting Deer Park's results in 2022, which showed a fast return on investment driven by an increase in oil prices after the end of the COVID-19 pandemic. The success was such that the president said the investment in the refinery had already been paid off. "The refinery had not reported such a result since 2007 and, for the second consecutive year, it closed a fiscal year without debt," PEMEX stated in a January 2024 presentation seen by Bloomberg Línea.

PEMEX CEO Octavio Romero reported that the acquisition of Deer Park turned out to be a great decision for Mexico. Following PEMEX's complete acquisition, the facility reported its strongest operational and financial performance of the past 16 years. Since PEMEX assumed control in early 2022, the refinery has achieved positive net returns, with US$954 million in 2022 and US$711 million as of 3Q23. This marks a significant improvement compared to losses in the previous three years. Carlos Cortez, Director of Finance, PEMEX, noted that this success represents the first time the Deer Park refinery concluded a fiscal year without incurring debt, showcasing a strategic shift in its operations. 

However, Deer Park's strategy compared to the rest of its refineries is different: it sends to Mexico only 15% to 20% of the fuel it produces, as it is more profitable to sell it in the US market. According to Alberto Velázquez, Director of Commerce, PEMEX, the NOC expects to be able to send 100% of Deer Park’s production to Mexico by 1H24, contributing to energy sovereignty. One of the challenges now is to improve the transportation of processed fuels from the United States to Mexico. PEMEX is evaluating various alternatives to meet this goal, such as transportation through pipelines or railways.