Page 4 - LatAmOil Week 18 2020.pdf

LatAmOil COMMENTARY LatAmOil
Mexico’s national oil company is short on storage space (Photo: Pemex)
Storage solutions under discussion
Mexico and Aruba are reportedly looking into new options for expanding oil storage capacity
WHAT:
Mexico may load oil into salt caverns, depleted wells and other unused sites, while Aruba intends to lease storage tanks at its idle refinery.
WHY:
Storage space is at a premium, owing to the global supply glut.
WHAT NEXT:
Expanding storage capacity may not relieve all the pressure on Mexico, while Aruba could serve as an example to the operators of other unused facilities in the region.
THE global oil industry has been under tremen- dous strain in recent weeks in the face of three challenges.
On one side, it is confronting the fact that the coronavirus (COVID-19) pandemic has brought energy demand down sharply all over the world. On another side, it is running up against the supply glut triggered by the battle between Russia and Saudi Arabia for market share and is struggling to find storage space for their extra barrels.
And at the same time, it is under enormous financial pressure because oil prices have fallen precipitously in response to unfavourable sup- ply/demand conditions.
But it is also looking for solutions. Within the last week, two countries in the Latin America/ Caribbean region have gone public with new strategies for expanding storage capacity. This essay will describe their plans.
Mexico: salt caverns and old wells
In Mexico, the national oil company (NOC) Pemex is reportedly considering proposals for storing crude in salt caverns and depleted wells.
According to a former company executive, Pemex is looking at refurbishing caverns in salt deposits on the country’s Gulf coast and is also eyeing other potential storage sites that have never been used before.
Meanwhile, he told Reuters last week, the NOC has also begun to store crude at tank farms at its Madero refinery and other locations and is using two floating storage and off-loading (FSO) vessels in the Gulf for the same purpose. (Additionally, he said, it is sending more oil to domestic refineries in a bid to keep inventory levels under control.)
These measures could help Pemex double its crude storage capacity from the current level of 11mn barrels, said the executive, who was not named. He cautioned, though, that the company might need more than a month to prepare the new storage sites.
Aruba: idle refinery tanks
Meanwhile, Aruba’s government has offered
to sign a lease agreement permitting the use of storage tanks at Refineria di Aruba (RdA), an oil-processing plant in San Nicolas. 
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