Revitalizing Mexico’s Refining and Petrochemical Industries

Moderator: Ixchel Castro, Manager of Oil and Refining Markets for Latin America of Wood Mackenzie
Panelist: Carlos Murrieta, Director General of PEMEX Industrial Transformation
Panelist: Stefan Lepecki, CEO of Braskem IDESA
Panelist: Daniel Zuluaga, Country Manager Mexico of Tiger Engineering
Panelist: José María Bermúdez, President & Director General of the Northern Region of Latin America at DOW Chemical 
Panelist: David Eduardo Rosales, Director General of Natural Gas & Petrochemicals at the Ministry of Energy

Mexico’s licensing rounds, spearhead of the country’s Energy Reform, provided new life for the oil and gas industries’ upstream and midstream sectors. What of the downstream sector? PEMEX’s role remains preponderant, yet there is confusion about its involvement with this segment in the coming years, as the reform crystallizes and a wide array of private players find their footing in the refining and petrochemical industries, according to the panelists debating the issue at the Mexcio Oil & Gas Summit 2017 in Mexico City on Wednesday.

Ixchel Castro, Manager of Oil and Refining Markets for Latin America of Wood Mackenzie, and moderator of the Day 2 panel, set the stage for the discussion: “Is the key to answering the challenges for Mexico’s refining and petrochemical industries more related to infrastructure or public policy design?” she asked.

The panel set out to offer a clear picture of those challenges and those on the panel drafting a roadmap toward the best solutions available were Carlos Murrieta, Director General of PEMEX Industrial Transformation, José María Bermúdez, President & Director General of the Northern Region of Latin America at Dow Chemical, Stefan Lepecki, CEO of Braskem IDESA, Daniel Zuluaga, Country Manager of Tiger Engineering, and David Eduardo Rosales, Director General of Natural Gas & Petrochemicals at the Ministry of Energy.

The exchanges reflected the importance of Public and Private Partnerships (PPP) to ensure a bright future for Mexico’s refining and petrochemical industries. Murrieta insisted on alliances being a fundamental element for the productive enterprise of the state’s growth. “PEMEX identified a major shift in the signs and behavior of the market, particularly in terms of prices, additional to the offer and demand of the sector,” he said. PEMEX’s Industrial Transformation DG insisted on the necessity of creative and concise projects from the private sector, designed under a win-win scheme. Echoing Murrieta, Bermúdez highlighted the importance of this partnership. “The public and private sectors need to become co-participants to raise industrial policies to new heights, develop advanced manufacturing and guarantee a space for permanent and constant dialogue,” he said.

PEMEX opened the door to collaboration through farmout agreements. But is this the only instrument available? Quite the contrary, according to Rosales, who added direct asset sales, joint operation of natural gas processing centers, petrochemical facilities or refineries, and processes managed by a third party. Parallel to this wide array of possibilities, Lepecki mentioned a vital element the success and economic viability for both parties: clear rules and conditions. “Clear legislation, with precise rules and regulations, can send the positive message investors need to generate the adequate trust and give the go ahead,” he said.

Lepecki added that many other industries depend on the added value PPPs to the chemical and petrochemical industries. “Agro, automotive, packaging and pharmaceutical industries, to name a few, are directly impacted by the impulse they receive from our line of business,” he warned. To that end, Zuluaga suggested PEMEX should focus on the segments of the industry where its past monopoly confers a comparative advantage and leave to the private sector those which do not represent a profitable business. “In this way, we will be able to invigorate both the projects and decisions, by their steadfast and economically coherent distribution between PEMEX and private players,” he said.

Looking ahead, Murrieta emphasized the importance of discarding completely more of the same policies that were previously in place and were harmful for the sector’s development. “Innovation. Flexibility. New ideas. Those are the elements we need to materialize PEMEX’s clear vision of what we want to set in motion for the long haul.”