Refining: The Plan

Mexico’s success in realizing its goal of energy independence lies in the success of the National Refining Plan. Along with the rehabilitation of the country’s six refineries, a crucial element in the strategy is the construction of the new Dos Bocas refinery. President López Obrador scuttled a number of private bids to build the new, massive Dos Bocas project, citing the projected cost and longer-than-desired time frames, which stretched beyond the government’s 2022 deadline. Instead, he handed it to PEMEX and the Ministry of Energy. 

In taking this action, López Obrador discarded criticisms and suggested that the original budget and time frame were possible, adding that "we are not worried" about the associated challenges. The budget, in any case, is already steep at US$8 billion. Regarding the time frame, Wood Mackenzie Manager Ixchel Castro warned that the refinery should not be hurried along because it will be operated for many decades to come. Rating agency Moody’s went one step further, arguing that the government’s decision to build the refinery itself would be a costly one, citing the lack of expertise in such projects. 

Furthermore, President López Obrador has mandated PEMEX to improve its usage of refining capacity. The refining of crude has fallen far short of the National Refining System’s (SNR) capacity, running at only 40 percent in the latter half of 2019. Although this might seem low, it is a marked increase compared to 2018, where PEMEX finished the year at a 505Mb/d processing level. By comparison, PEMEX ended 3Q19 at a 657Mb/d processing level. 

A variety of factors have contributed to the refining issue. First, it has direct ties to production. Because production has been dropping for many years, there is less crude to process as a consequence. Also, a great source of PEMEX’s profit comes from exporting crude, not refined, oil to the US. Another issue is the state of the existing refineries, located in Cadereyta, Madero, Minatitlan, Salamanca, Salina Cruz and Tula. These refineries are quite old, some of them built many decades ago, and have been neglected in terms of maintenance and upkeep. 

Concepción de la Garza, Director of Golfo Suplemento, which has provided maintenance for PEMEX refineries for almost two decades, calls the situation “complicated.” “Working in the refineries has been complicated over the last two years. The five refineries we are working at are operating at an average of 30 percent capacity. There is no activity at all in Madero nor Minatitlan. There is some activity in Salamanca but we are able to operate more effectively in Salina Cruz and Cadereyta," De la Garza says. A reason for having next to no output from the two lowest performing refineries was explained as stemming from operational problems upon the conclusion of the general maintenance programs. Keeping the maintenance going and pulling Madero or Minatitlan out of their current state will cost significant amounts of money for the López Obrador administration. But without enough oil to keep the refineries occupied, disrepair will only grow more problematic. 

In December 2018, Octavio Romero Oropeza addressed the problems in The National Refining Plan, including the building and future operation of the Dos Bocas refinery, which will be located in Paraiso, Tabasco. The main goal of the plan is to achieve energy independence in Mexico, cutting out the reliance on the US for refining, among other dependencies. At the heart of the plan is increased fuel production, improvement of current refining processes and a renewal of the current refineries and associated oil production facilities. 

With Dos Bocas joining the fold, the seven refineries are predicted to process quite a bit more, according to the PEMEX Business Plan: 1.163MMb/d in 2022, when Dos Bocas is expected to start restricted operations, up to around 1.470MMb/d in 2023 and onward, when all refineries should be working at their optimal capacity and benefiting from the peak production in the NOC’s newly developed fields. For 2023, the refining predictions translate into 596Mb/d in terms of gasoline, 402Mb/d of diesel, 239Mb/d of turbosine and 253Mb/d of other fuels. 

The National Refining Plan includes the following steps:

• Salamanca refinery will be adapted in two stages. Its chain of processes will receive maintenance so that at the end of 2019 it is able to produce at 75 percent of its capacity.

• The renovated Minatitlan refinery requires a change of its catalytic converter and will re-instate its Mine 1 plant to increase its capacity ,which will be finished in 2020. 

• Madero refinery has been marked as the most critical plant. It has been out of operation for more than a year; however, the start of a first stage of revisions was completed in early 2019 and its refining train No. 2 was projected to be back in operation in early 2020.

• Cadereyta Refinery received deep maintenance to its dynamic equipment and is to undergo further work to increase its refining capacity. 

• Salina Cruz Refinery faced a number of incidents; therefore, an intense program was designed to reconstruct the crude oil reception system as well as primary plant distribution. Operations will be carried out gradually to achieve a production of up to 70 of its capacity by December 2019.

• As a part of the Tula refinery, the H-Oil plant is to be improved. Its use, the government says, is especially crucial to increase the production of gasoline.