EconomyFinancialThe end of Mexican crude exports will affect US...

The end of Mexican crude exports will affect US refineries

The federal government’s plan to cease crude exports will have repercussions on operations at some US refineries, whose diet depends to some extent on Mexican product.

Several US Gulf Coast refineries are set up to operate with heavy oil, such as the Maya crude produced by Pemex.

The Mexican product has become a good option for US refiners due to its proximity and transportation logistics. The United States is the destination of 57% – around 580,000 barrels – of Pemex’s sales abroad, according to the latest data from the oil company. Although in 2021 shipments to this country were reduced 12% compared to a year earlier, in line with the reduction in exports registered by the company in general.

A cessation of foreign sales would generate a short-term negative impact on the region’s refineries, which would have to seek agreements with sellers of oil of similar quality to Mexico, such as Canada, Colombia or Ecuador. Analysts say that Canada would become the most feasible option to supply the market that the Mexican state company would leave free.

Canada is already the main supplier of oil to the US market, with exports exceeding 4.5 million barrels per day, according to the US Energy Information Administration (EIA).

“Assuming that the promise [to stop exporting crude] is kept and that for ideological reasons or whatever, Maya crude is no longer exported to the United States, all these refiners are going to have to look for substitutes, they are going to affect their operations because if you change a barrel of Maya for a barrel of another origin, it takes you a while to recalibrate all your equipment to get the refinery operating properly again,” explains Jaime Brito, a Houston-based analyst and vice president of the consultancy firm Stratas Advisors. “You affect and that makes you reduce the percentages of use and produce even less gasoline.”

The plans of the federal administration are based on reducing oil exports to 435,000 barrels per day this year and suspending them completely once the Dos Bocas refinery in Tabasco comes into operation in 2023. For the time being, these forecasts have not been included in the documents of the Ministry of Finance.

The forecast for this year would imply a drastic reduction with respect to the shipments that the oil company currently has. Its most recent data indicates that during 2021 exports reached an average of 1,018 million barrels per day.

EIA data for last October indicates that at least eight companies would be impacted by a halt in exports, including Valero, Marathon Petroleum, Chevron and Phillips 66. The companies were consulted but declined to comment.

The high production of fuel oil that Pemex has registered in recent years – as it has increased its commitment to increase the use of its refineries – could compensate for some needs of the industry, although it would only work for a fraction. American refineries

“Our experience has been that as refinery operations in Mexico increase, the export of high sulfur fuel oil increases, and that is a good feedstock for our highly complex system on the Gulf Coast of the United States. States,” Gary Simmons, Valero’s chief commercial officer , said in his latest conference call with analysts, according to Reuters .

Some analysts could find it difficult to win back the market if at some point it opts again to export its crude oil. taking product. What is going to happen is that the dynamics of the market are going to change and the one that is going to lose is Mexico,” says a crude oil trader.

Analysts expect that, if materialized, the first cuts will impact the Asian market, where Pemex sends Isthmus or light crude. The company resumed shipments of this mix in December 2019, after not doing so for a while and now they already represent about 20% of total shipments.

But light crude is more profitable, because it can result in higher quality refined products and less fuel oil. Thus, the first impacts could be for some complexes in South Korea and India, where the company has concentrated its light crude shipments in the last two years.

In recent months, the state-owned company has opted for a greater use of heavy crude to make up the diet of its refineries, because it is priced slightly below light crude, according to internal sources of the oil company.

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