Refining Results and Analysis for 2013

2013 bore witness to some of the most important changes to affect the Mexican downstream sector in decades. This process took place independently from the Energy Reform, and included a change in the administration models of both refineries and petrochemical facilities to allow greater private sector participation. This happened partly due to expectations of PEMEX’s future increase in operational autonomy, expectations that were fulfilled once the final version of the Energy Reform called for the transformation of PEMEX into a productive enterprise of the state. Although this transition is scheduled to take place over several years, it does point to the eventual facing of an uncomfortable reality. PEMEX Refining is losing a lot of money every year, and if PEMEX is now meant to be run as a value-driven company, it will need to decide how to administer a system that is not engineered toward profit. This particular thorn in PEMEX’s side, however, will need careful and delicate handling. This notion was supported in the secondary laws, with the inclusion of a clause stating that the only major section of the oil and gas industry not to be immediately open to private participation will be the sale of fuel. The capacity stemming from the extensive expansion projects that were completed, executed, planned, or agreed upon last year will definitely bring a significant increase to all of 2013’s numbers in the coming years, but these were mostly based on a system undergoing numerous changes and reconfigurations. In that sense, the results could be explained by the effects that these aforementioned changes can have on daily operations.

In 2013, Mexico’s refinery system processed a total average of 1.224 million b/d, representing a 2.1% increase over last year’s results. However, it only met 93.2% of the refining expectations set by the processing program. Some of the causes cited for this shortcoming were instances of maintenance in certain refineries, delays to repairs in other refineries, failures in auxiliary services that led to unscheduled halts in processing, and unscheduled cuts in crude supply. However, economic factors must also be mentioned as a possible reason for PEMEX to avoid fulfilling its whole processing program or, at least, for not making it a priority. If PEMEX is losing a considerable amount of money on each barrel processed, the maximization of said processing might not be among its primary interests, regardless of what its program might indicate.

Another matter to consider when analyzing these results is the nature of the crude itself. Of the aforementioned average 1.224 million b/d processed by Mexico’s refinery system in 2013, 727,600 barrels were filled with light crude, or 59.4% of the total. The remaining 40.6% corresponded to 496,000 barrels of heavy and reconstituted oil. No superlight crude was processed at all. Many experts and analysts are saying that even before deepwater or shale reservoirs begin to be a part of Mexico’s production future, the extraction of heavy oil must be one of PEMEX’s top priorities. 63% of the average 1,379 million b/d being extracted from new fields, whose relevancy in PEMEX’s production strategy is scheduled to grow every year, consist of heavy oil that PEMEX’s refineries are not designed to process. Therefore, the yield from this type of oil is lower than that obtained from processing light oil. As heavy oil is going to become more prominent, PEMEX’s refining strategy must be directed towards reconfiguring its refineries to process this new type of oil.