PEMEX Increased its Fuel Oil Production

PEMEX increased its production of fuel oil in August compared to the previous month. According to the NOC, fuel oil represented 33 percent of its refined products, in contrast to the goal of 28 percent for 2022. Meanwhile, gasoline represented 30 percent of the company’s refined fuels.

In 2021, PEMEX planned to drop its fuel oil production to 28 percent by 2H22, to 27 percent by 2023 and to 17 percent by 2024. José Manuel Rocha Vallejo, Deputy Director of Petroleum Products Production, PEMEX, recently presented a plan to develop new coker units for the Tule and Salina Cruz refineries, which would aid PEMEX in its mission to refine cleaner fuels than the polluting fuel oil.

In 2020, Mexico’s fuel oil commercialization strategy became more complicated when the International Maritime Organization (IMO) implemented new regulation that prohibited ships to use fuel oil with more than 0.5 percent sulfur, criteria that PEMEX’s fuel oil does not meet. Nevertheless, El Economista reported in March that demand from the US helped Mexico in avoiding an excessive stock of fuel oil.

The increase in the production of fuel oil also enabled the Federal Electricity Commission (CFE) to produce more power to lower prices, now that outside demand for the fuel has diminished. However, experts have highlighted the disadvantages of utilizing this fuel to create electricity due to the pollution it generates, the main reason for its IMO ban.

As reported by the National Institute of Ecology and Climate Change (INECC), fuel oil’s cheap levelized cost of energy (LCOE) is highly relevant for Mexico’s economy. These prices make the fuel an easy option to create energy, and the growing US demand makes its production viable. According to the institute, replacing fuel oil with natural gas is a cost-effective measure in the long run, but the feasibility of this option depends on Mexico’s investment in infrastructure: “The economic viability of this measure will depend on the evolution of the fuel oil prices in the market and the internal assessment of the benefits in air quality and public health that a decrease in the consumption of fuel oil for power generation would bring,” INECC’s report read.

President López Obrador has said that the modernization of refineries will make Mexico self-sufficient in energy. The recently-inaugurated but unfinished Olmeca Refinery, touted as a flagship for Mexico’s oil innovation, is hoped to allow the country to produce higher-value products and greatly diminish its refined fuel product imports.