Page 4 - LatAmOil Week 36 2021

COMMENTARY Y
LatAmOil COMMENTAR LatAmOil

(Photo: Shell)
Trouble in Deer Park

Pemex is pursuing a refinery takeover deal that is likely to put further strain

on its shaky finances – and draw unwelcome attention from US legislators

MEXICO’S national oil company (NOC) Pemex the Mexican company’s finances are already
is pursuing a deal that will make it the sole owner under considerable pressure.
WHAT: of a 170,000 barrel per day (bpd) refinery in As Bloomberg noted recently, Pemex’s debt
The Deer Park refinery, Deer Park, Texas. The proposed transaction portfolio is currently larger than that of any
majority-owned by Shell, is designed to support the Mexican govern- other oil company. The NOC owes more than
reportedly racked up ment’s effort to reduce the country’s reliance on $115bn to all of its creditors, and its debt portfo-
losses of $360mn be- imported fuels, but it may be more notable for lio is likely to grow even more in the near term,
tween January and July. the strain that it puts on the NOC’s finances. given that it has seen two prominent credit rat-
Pemex is currently a minority shareholder ings agencies, Fitch Ratings and Moody’s Inves-
WHY: in the refinery, with a 49.99% stake. Earlier this tors Service, downgrade its securities to “junk”
The plant is the target of year, though, it revealed that it was willing to buy level since mid-2019.
a takeover bid by Pemex,
which is already under out its partner Royal Dutch Shell (UK/Nether- Mexican government officials, including
considerable financial lands), which owned the remaining 50.01% of President Andres Manuel Lopez Obrador, have
strain. equity. said they believe Pemex can improve its financial
Although the bid was unsolicited, it did draw standing if it raises production and slashes fuel
WHAT NEXT: a positive response. Shell agreed in May to sell import bills by refining more crude. However,
The deal, which has yet its stake in the Deer Park plant to Pemex for the company’s oil output has been slipping for
to be finalised, has also $596mn. At the time, the NOC said it would use more than a decade and is not likely to recover
drawn criticism from a federal funds to buy the stake. without extensive (and expensive) investments.
US legislator because of At the same time, Pemex’s six existing refin-
safety concerns. More financial pressure for Pemex eries are operating at less than 50% of their total
This is a problematic strategy, not least because design capacity of 1.5mn bpd.

P4 www. NEWSBASE .com Week 36 09•September•2021