PEMEX’s Refining ESG Challenges

As López Obrador’s administration nears its end, the self-sufficiency plan for Mexico's oil industry has fallen short of expectations, with PEMEX facing numerous ESG challenges. These issues have not only hindered the progress of key refining projects but have also affected the company’s credit rating. One of the most significant challenges has been the overhaul of Mexico’s National Refining System (SNR). This revamp, which aimed at boosting domestic refining capacity, has faced numerous delays and environmental setbacks.

In May the SNR processed 842Mb/d, an 11% decrease compared to April and its lowest level so far this year. The most significant reduction in oil processing occurred at the Cadereyta refinery in Nuevo Leon and the Minatitlan refinery in Veracruz.

Cadereyta is currently under scrutiny due to concerns about its environmental and health impacts. Civil organization Vibra Cívica is leading a campaign for a 2025 popular consultation on the refinery's future, focusing on its harmful emissions, such as sulfur dioxide and fine particulate matter. Advocates argue that closing the refinery could reduce economic losses, lower water consumption, and improve local air quality. Governor Samuel García has been vocal about the refinery's contribution to air pollution in Monterrey, leading to a public dispute with president López Obrador, who has defended the refinery's operations. 

Meanwhile, the landmark project, the Olmeca refinery at Dos Bocas, Tabasco, has also faced setbacks. Although PEMEX reported that Dos Bocas began refining operations at a capacity of 170Mb/d in August, analysts argue that the refinery is still in the testing phase. Gonzalo Monroy, an energy sector analyst, noted that the refinery is not fully operational, missing key elements like a cogeneration plant and gas interconnections. These delays have raised questions about the refinery's ability to meet its planned capacity.

The Olmeca refinery has also sparked ESG and safety concerns in Dos Bocas. The refinery raises several concerns due to its proximity to residential areas. Key issues include the lack of an emergency escape route for nearby residents in case of an accident, and the need for air quality monitoring systems to measure sulfur emissions and ensure they comply with official standards. There is also concern about the potential economic collapse of the nearby municipality of Paraíso once the refinery's construction phase ends.

PEMEX's Tula refinery also exemplifies broader challenges. The construction of a coking plant at Tula, which began in 2016, has been repeatedly delayed, with the latest estimate pushing the start of operations to 2025. This facility is crucial for converting residual fuel oil into more valuable products like gasoline and diesel. However, the plant’s completion has been postponed due to technical and financial difficulties.

PEMEX’s Deer Park refinery in Houston recently faced a diesel spill in the Houston Ship Channel. While the spill was contained, such incidents are common in the area and highlight ongoing environmental risks associated with refining operations. Deer Park remains a crucial purchase for PEMEX as it has yielded record profits.

PEMEX has reported some steps in its sustainability efforts. The company reports a reduction in its greenhouse gas emissions of 11.6% in 2022, the lowest level since 2019. This reduction was highlighted in a recent sustainability report to investors, where PEMEX outlined its plans to explore new business opportunities in hydrogen, cogeneration, and electric vehicle charging stations.