Page 5 - NorthAmOil Week 21 2021

NorthAmOil COMMENTARY NorthAmOil

Shell had initially
planned to retain its
stake in the Deer Park
refinery, but changed
its mind following an
unsolicited offer from
Pemex.

for refined products took a hit during the coro- to be the most profitable of Pemex’s refineries.
navirus (COVID-19) pandemic, and while a The state-owned company has seen losses in
recovery is now underway, it is not anticipated its domestic refining business, which is made
to return to pre-pandemic levels until at least up of six plants in Mexico and a seventh under
2022. Indeed, it was amid the fall in demand for construction. Deer Park will be the first refinery
refined products that Shell decided to shutter that Pemex will solely own and operate overseas.
Convent last year. This week, Lopez Obrador said he expected
Mexico to recover its investment in Shell’s Deer
Unsolicited offer Park stake during the next 2-3 years.
It is worth noting that Shell had initially included “We were missing 200,000 bpd to reach
the Deer Park refinery among the six plants it self-sufficiency. Our options were restarting
planned to retain after offloading its non-core a refining train at Cangrejera [petrochemical
refining operations. However, the super-major complex] or buying Deer Park,” Lopez Obrador
said this week that it had received an unsolicited said. “There are no losses.”
offer from Pemex. This appears to have been
favourable enough for Shell to agree to transfer What next?
its stake in Deer Park, giving Pemex full owner- The flurry of developments related to Shell’s
ship of the refinery. refining portfolio illustrate that despite the
The consideration for this transaction is impact of the pandemic and longer-term uncer-
$596mn, consisting of a combination of cash tainty related to the energy transition, interest in
and debt, plus the value of hydrocarbon inven- buying refinery assets remains considerable.
tory, Shell said. The super-major will retain its The Vertex transaction is considerably Lopez Obrador
chemicals facility at the site, and said it would smaller – the Mobile refinery has a capacity of
continue working with Pemex in an “integrated 90,000 bpd and is being sold for $75mn plus the said he expected
way”. cost of hydrocarbon inventory. Nonetheless, the Mexico to recover
The transaction comes not long after Mexi- deal marks a step forward in Shell’s plans for its
can President Andres Manuel Lopez Obrador, refining portfolio. its investment in
whose time in office has been characterised by Meanwhile, Convent could fetch a higher
energy nationalism, criticised the Deep Park price. According to Reuters, ACER initially Shell’s Deer Park
partnership, saying it had not been of any ben- offered $1.75bn for the 211,146 bpd plant,
efit to Mexico. though this was rejected. ACER is reported to stake during the
“Since it was built, there have been no ben- have followed this up with a bid of $1.25bn. next 2-3 years.
efits for Mexico, barely the processing of “Shell considers a wide range of qualifications
Mexican crude,” Lopez Obrador said during and factors including a prospective buyer’s abil-
a press conference in early May. He also said ity and experience to operate complex manufac-
that no profits from the joint venture had been turing assets safely,” a Shell spokesman, Curtis
returned to Pemex since the partnership with Smith, was quoted by Reuters as saying.
Shell was established in 1993, as they had all ACER, for its part, has said that if Shell will
been re-invested. not sell its Convent facility to it, the company
Pemex sells Maya heavy crude to Deer Park, will build a new 300,000 bpd refinery nearby.
which has the capacity to process up to 340,000 This claim further illustrates the fact that oper-
barrels per day (bpd) of oil, through a long-term ating US refineries is currently considered an
supply contract. However, Deer Park is thought attractive option by a number of companies.™

Week 21 27•May•2021 www. NEWSBASE .com P5