The subsidiary of the state-owned Pemex that groups the refining businesses has never reported positive results, but the losses have increased as the presidential goal of increasing fuel production in the refineries progresses.
Pemex Transformación Industrial (TRI), the arm of the oil company that is in charge of the refining business, reported a net loss of 172,391 million pesos in 2021, just when it took the production of oil products to its highest figure since 2017.
During the past year, Pemex TRI had a higher cost of sales than the amount of income it obtained from its sales. The first category stood at 982.453 million pesos and the second at 891.629 million pesos. These figures show a simple reality: the affiliate spends more money to produce and sell its products than the money it earns from its marketing.
Losses have been recorded historically, but have increased in recent years. In 2020 these were even higher, of 219,342 million pesos, the highest figure that the company has registered.
Pemex had managed to reduce losses in this segment during the past administration as it reduced the number of barrels it processed in its system.
But the latter has changed in the Obrador administration. And the bet has been completely the opposite: in January – the latest official data available – the refineries processed 800,000 barrels of crude oil, a number above what was previously observed, but still below the goal of one million barrels per day.
Losses are partly explained by shrinking refining margins. During the fourth quarter of last year, when the state-owned company significantly increased its production of gasoline and other products, the profit margin was only 0.31 dollars per barrel. Pemex says in its financial report that this is explained by higher crude oil prices, but that they have been “partially offset by the improvement in operating performance in the National Refining System with a higher yield of distillates.”
Analysts explain that the refining business usually has small profit margins, which in the case of Pemex are further reduced due to the state of the refineries and the large production of fuel oil that the company has.
But despite the constant losses, the refining business continues to be the state company’s main bet. Both in the speech, and in the investments it makes.
The administration of the national oil company has decided to increase the investment in Pemex Industrial Transformation above the authorized one. In 2021, as an example, the investment made in the subsidiary was 147.8 billion pesos. The authorized figure had been 56.5 billion pesos.
A year earlier, during the start of the Covid-19 pandemic and when many refineries lowered their production, the state-owned company also overinvested in Pemex Tri. The approved investment amount was 58.2 billion pesos and the exercised amount was 69.5 billion pesos, according to the oil company’s records.
In contrast, in the production and exploration business, it has steadily decreased investments. In 2021, it invested 240.3 billion pesos of the 289.9 billion pesos that had been approved. A year earlier, it also decided to cut the budget of Pemex Exploration and Production to reduce its expenses during the height of the pandemic.
The current administration of Pemex has decided to continue with the commitment to refined products, despite criticism from analysts and rating agencies that have recommended increasing its investments and activities in its exploration and production business, which means higher income.
Analysts have also warned that the higher income that the oil company may obtain as part of the international increases in the price of oil could be reduced by the large losses that they anticipate will continue to present the subsidiary in charge of oil refining.