PEMEX Reduces India Crude Exports

Consistent with Mexico’s goal to guarantee oil independence, PEMEX aims to stop exporting crude oil entirely. The NOC already reduced crude exports to India, the third largest market for this industry.  

Last year, India and South Korea were the top Asian crude buyers of the state-owned company. However, after the purchase of the Deer Park refinery and with the current progress of Dos Bocas, PEMEX is looking to forfeit its crude sales to India. For the first two months of the year, Mexico programmed a crude shipment that will reduce exports from the 98Mb/d sent in the same period in 2021 down to 15Mb/d. PEMEX exported an average of 132.5Mb/d in 2021, equivalent to US$3.26 billion in PEMEX’s market crude prices in Asia.

PEMEX is calling Indian oil refiners to notify them of the coming volume reduction, sources told Reuters. The company is furthermore rejecting requests from refiners to sign new contracts. The NOC announced in December 2021 that it would gradually start to cut all crude exports with the aim to completely suspend them by 2023 to comply with the government’s objective of expanding the refinery business and achieving energy sovereignty.

Jesús Carrillo, Economic Investigation Coordinator, IMCO, said that if PEMEX where to sell at the same price to national markets as to international markets, it would not lose a cent because stopping exports does not mean an automatic loss of income. However, PEMEX prices have to be reduced for the local market and in doing so, avoiding losses is nearly impossible.

PEMEX signed a long-term agreement with Shell as part of its purchase of Deer Park. This makes Shell the provider of most of the crude oil that the facility will process for the next 15 years, according to a report from Reuters. The agreement dictates that Shell will supply approximately 200Mb/d of crude to Deer Park and a PEMEX unit will supply approximately 115Mb/d, which will put the refinery close to its full processing capacity of 340Mb/d. 

Dos Bocas is supposed to start refining next year. Nevertheless, the project will reportedly cost 40 percent more than the previous estimation and will likely not be finished in 2022, which was the government’s original deadline. Analysts point out that the price tag now stands at US$12.5 billion. Rocío Nahle, Mexico’s Minster of Energy, offers a different view: “Dos Bocas is being built in record time. Opinions around the world are very positive,” she said.

Mexico’s refinery system has a joint processing capacity of 1.6MMb/d. However, due to lack of investment, interruptions and insufficient oil input, production stands at only a fraction of this.