Page 9 - LatAmOil Week 14 2020
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Indeed, Mexican President Andres Manuel Lopez Obrador last week said that the coun- try would increase domestic refining capacity rather than cut production.
In the past, Mexican officials have said that the country will expand the domestic refining sector by continuing to build a huge new refin- ery while also upgrading existing facilities. Last week, Lopez Obrador declared that construc- tion on the new $8bn Dos Bocas refinery would not be postponed or cancelled.
The president also said he had called on G20 member countries to avoid commercial monop- olies and tax impositions. “Crude prices have plummeted in a way we had not seen in recent times, I think in over 20 years,” he was quoted as saying by Reuters.
The Dos Bocas refinery is already under construction in the southern Mexican state of Tabasco. When finished, it will be able to process 340,000 bpd of domestic heavy crude oil.
The government is hoping the project will end Mexico’s dependence on imported petro- leum products, most of which come into the country from the southern US states of Texas and Louisiana. In January, the Bank of China (BoC) and the Industrial and Commercial Bank of China (ICBC) pledged to invest $600mn into the new refinery.
The president favours increasing refining capacity (Photo: Energy & Commerce)
Pemex will maintain current output levels despite pandemic
MEXICO’S national oil company (NOC) Pemex has said it will maintain current crude produc- tion levels, in spite of the coronavirus-driven decline in demand and uncertainty over global oil prices. The firm also acknowledged, though, that it already had enough fuel in its inventories to satisfy domestic demand.
In a statement to the stock exchange, the highly indebted NOC said it intended to imple- ment a business continuity plan aimed at guar- anteeing distribution of supplies during the coronavirus (COVID-19) crisis. This plan has also enabled the firm to make gradual reduc- tions in its labour force, using a shift system and remote working in order to guarantee worker safety, Pemex said.
Pemex’s statement raises several questions, not least because 2020 looks to be the compa- ny’s 15th straight year of decline in oil produc- tion levels. The company accounts for a large part of Mexico’s budget revenues but is facing significant challenges because of its high level of indebtedness.
The NOC responded to questions about its fate in late March by saying that it intended to reduce administrative expenses and contracts this year in order to help deal with the impact of falling crude oil prices. It said it hoped to save around $217mn in contract costs and $27mn in administrative costs in this fashion.
Octavio Romero, the company’s CEO, said around the same time that Pemex would prior- itise its most profitable projects going forward.
He also stated that all necessary adjustments would be made to ensure that the firm remains financially stable.
US-based Fitch Ratings warned recently that Pemex was increasingly vulnerable to low oil prices and to the coronavirus pandemic, which is rapidly wiping out crude demand and sending markets tumbling. “At the current Mex- ico’s crude basket price of below $20 per barrel, Pemex upstream business (exploration and pro- duction) does not generate enough cash flow to cover operational and financial costs,” the rat- ings agency said.
Pemex is the “most vulnerable” among its peers in Latin America and may need more government support and higher revenue from its refining business to withstand the price slide, Fitch added. The agency cut the rating of Pemex’s bonds by a notch to BB with a negative outlook, taking them nearer to junk status.
Pemex will maintain output at current levels (Photo: File)
Week 14 09•April•2020 w w w . N E W S B A S E . c o m P9
