The Olmeca Refinery Has Been Inaugurated, but Qualms Persist

President López Obrador’s flagship refining project in Dos Bocas, dubbed Olmeca, finally reached its inauguration date, despite its unfinished construction and persistent controversies. The Mexican Institute for Competitiveness (IMCO) said the construction and operation of Dos Bocas will cause more financial and refining losses to the country. Moreover, in less than a month, two thefts were recorded at offshore platforms of PEMEX suppliers, in which substantial machinery was lost.

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Mexico:

Doubts Remain Following Dos Bocas’ Inauguration

Last Friday, López Obrador inaugurated the Olmeca refinery, the government’s flagship project toward achieving its energy-sovereignty quest. The administration is expecting the new refinery to process up to 340Mb/d of crude oil, producing 170Mb/d of gasoline and 120b/d of ultra-low sulfur diesel. However, Dos Bocas is admittedly not finished yet. Experts believe gasoline production will only start by the end of 2023 at the earliest. What is more, Olmeca would not reach full operational capacity until 2026.

PEMEX to Lose Money with Dos Bocas: IMCO

IMCO warned that the Dos Bocas refinery had several deficiencies in its development such as bad planning, inadequate resource allocation and a lack of transparency. Moreover, the institute mentioned that PEMEX Industrial Transformation (PTRI), the subsidiary in charge of the refining and petrochemical business, could face major losses following Olmeca’s start of operations, worsening the financial situation of the already heavily indebted state oil company.

PEMEX Platforms Targeted by Pirates

The vulnerability of PEMEX infrastructure is a common industry concern, especially with regards to the ever-present risk of huachicoleo, which has remained a drain on the NOC’s coffers. In the past month, however, more direct thefts have plagued the company, as offshore platforms belonging to service providers contracted by PEMEX have fallen victim to two robberies in which machinery of significant value has been stolen.

Ethanol-Incorporating E10 May Be Legalized in 2022

In countries like the US, ethanol has replaced methyl tert-butyl ether (MTBE) as an oxygenate component in gasoline, due to its often-lower prices and growing concern regarding MTBE’s polluting effects. However, in Mexico, the use of ethanol to create E10, which is 90 percent gasoline and 10 percent ethanol, is not permitted. This led companies and organizations to voice their disagreement and request to meet in working groups to ensure E10’s legalization.

International:

OPEC Misses Production Target in June

In June, the Organization of the Petroleum Exporting Countries (OPEC) produced 28.52MMb/d, 100,000b/d less than the production in May. Reuters’ survey showed declines in Libya and Nigeria’s figures offset supply increases from major oil producers such as Saudi Arabia.

G7 Countries Propose Price Cap for Russian Oil

 In an effort to limit Russia's ability to continue funding its war against Ukraine and protect consumers from rising energy prices, the G7 countries have proposed a price cap on Russian oil. Analysts say the plan could do more harm than good, as key consumers must be involved and the move may be impossible to pull off due to time pressure. In addition, Russia threatened that the consequences would be serious, since the measures could increase hydrocarbons prices even more. 

Russia Could Cut Supply to Key European Countries

Following the war between Ukraine and Russia and the sanctions Russia received, the latter country has reduced the supply of gas and oil to key European countries. Economists warned that if tensions continue to rise, Russia could cut off these supplies entirely, driving up oil and gas costs globally.