Page 9 - LatAmOil Week 20 2022

LatAmOil COMMENTARY LatAmOil

They are also playing a role in Brazil’s upcoming as Bolsonaro, a right-wing populist who has
presidential vote. The country’s incumbent Pres- moved away from his earlier statements in
ident Jair Bolsonaro, who hopes to retain his job favour of market economics, is running against
in the October election, depends on the political leftist candidate Luiz Inacio da Silva.
support of Brazil’s independent truckers. As a
group, these truckers wield considerable influ- Asia
ence, and they are outraged at the NOC Petro- Across the Pacific, lockdowns in China have
bras’ decision earlier this month to increase offered something of a reprieve to diesel and
domestic diesel prices to keep them more or less jet fuel markets, dampening demand at a time
in line with world market trends. when the war in Ukraine and sanctions on Rus-
This stance is understandable from a political sia have caused jet fuel prices to spike. However,
perspective, but the truckers have threatened to there have been warnings that as Chinese lock-
stage a national strike and mount road block- downs eventually ease and demand rebounds,
ades on May 21 to express their discontent. If Russian supply will decline further and prices
these protest actions continue beyond May 21, can be expected to rise higher still.
they have the potential to wreak great havoc on The surge in jet fuel prices – up more than
the Brazilian economy, which is still working to 50% so far this year – has come as more and
recover from the ravages of the pandemic. This more Asian countries are lifting pandemic-re-
is not a theoretical matter, as it has happened lated travel restrictions. It threatens to under-
before. Many Brazilian voters still have vivid mine the impact of this reopening for airlines.
memories of the 10-day truckers’ strike in 2018 There are some bright spots, such as new
that ended up paralysing the country for weeks. refining capacity coming online in Asia fol-
Bolsonaro, of course, is taking the truckers’ lowing delays that have been attributed to the
side – and taking Petrobras to task for raising pandemic and to weak refining margins. The
prices, even though the company is not required situation has now changed, with Asian refiners
to take the government’s policy considera- reported to be reaping record profits in recent
tions in mind when setting tariffs. He has also weeks as the region also ramped up exports to
replaced the state-owned company’s CEO and Europe in a bid to help replace a shortfall of Rus-
appointed a new cabinet member to head the sian fuel.
governement department following the resigna- However, with many refiners (at least outside
tion of Mines and Energy Minister Bento Albu- China) already running at full capacity, there is
querque. Additionally, Albuquerque’s successor limited potential to ramp up fuel production as
Adolfo Sachsida has started talking about the demand continues to rise. China is an exception
possibility of privatising Petrobras – apparently as lockdowns there persist. Refinery through-
because the president is tired of being blamed put in the country was down 11% year on year
for its unpopular decisions and not just because in April and had fallen to its lowest level since
a sell-off might improve its performance. March 2020. Chinese refinery output can thus
These developments all but guarantee that be anticipated to rise as lockdowns in that coun-
Petrobras’ fate and pricing will be part of the try ease – but so too can the country’s domestic
discussion in the run-up to Brazil’s presidential fuel demand, and thus the potential to ease the
election. The discussion is likely to be spirited, looming fuel supply crunch remains limited. ™

MEXICO
Sources: Olmeca refinery may cost $14.5bn

NEW reports have surfaced indicating that $14.5bn. Citing company filings and a source
Mexico’s national oil company (NOC) Pemex who spoke on condition of anonymity because
is on track to spend $14.5bn, or nearly twice as the information has not been made public, the
much as originally planned, on the construction news agency said that Pemex expected to see its
of the 340,000 barrel per day Olmeca refinery. total budget allocations for work on the refinery
Reuters had said earlier this month, citing reach $12.5bn by the end of 2022 and then rise
government documents and sources close to the by another $2bn afterwards.
project, that the final price tag for the Olmeca If accurate, this figure of $14.5bn would
refinery, formerly known as Dos Bocas, was represent an 81% cost increase on the original
likely to reach $14bn. This is fully 75% higher figure of $8bn. It would also be 48% higher
than the original estimate of $8bn, and it is than Nahle’s estimate of $9.8bn – and even 21%
nearly 43% higher than the most recent estimate higher than the internal cost estimate of $12bn
of $9.8bn put forward by Mexican Energy Min- that Pemex is reported to have drawn up in 2020.
ister Rocio Nahle. According to Bloomberg’s source, the NOC’s
However, Bloomberg reported on May 13 board of directors is likely to meet soon to dis-
that the final figure may go even higher, reaching cuss the Olmeca refinery project.

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