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Pemex sees US as crude export opportunity

Mexico’s state-run Pemex says it wants to capitalize on Venezuela’s dwindling crude production to boost its own exports of heavy crude to the US market.

Asked whether falling crude production in Venezuela could represent an opportunity for the Mexican oil company, Pemex top executive Carlos Trevino said this week “without a doubt it is, and without a doubt we are taking advantage of it.”

Venezuela exported 438,000 b/d of crude to the US in January, or 38pc less than the previous year, data from the US’ energy information agency (EIA) shows. Over the past 12 months, Venezuelan crude exports to the US have fallen by 20pc.

In the same period of time, Mexican crude exports to the US rose 3.7pc, even though August and September export levels were unusually low because of repeated earthquakes in Mexico that damaged refineries and Hurricane Harvey along the US Gulf coast that temporarily shut much refining capacity there.

In November and December, US exports of Mexican crude reached 805,000 b/d and 726,000 b/d, respectively, the highest since June 2015, EIA data shows.

The US has been mostly relying on crude imports from Canada and Iraq, which are both on the rise.

But Canadian oil companies have been faced with pipeline shortages, further exacerbated by a spill on TransCanada’s Keystone pipeline in South Dakota last November. Bottlenecks have also limited oil-by-rail movements, meaning they are unlikely to significantly ramp up crude exports to the US in the immediate future.

Compared with Iraq, Mexico’s heavy crude oil has the advantage of being closer to US refineries.

US Gulf coast refineries that reduced imports of Venezuelan crude last year while more than doubling consumption of Mexican grades included Valero’s 293,000 b/d refinery in Corpus Christi. Chevron’s 340,000 b/d refinery in Pascagoula, Mississippi, increased Mexican imports by 37pc, while Phillips 66’s 247,000 b/d Sweeny, Texas, refinery took Mexican imports for the first time in at least two years.

Trevino said this opportunity could also benefit other producers in Mexico, who have won blocks under the energy reform, and are starting to, or will soon, produce a heavy crude similar to Pemex’s.

“This gives a window to place those [heavy] crudes, not only to Pemex but also to Mexico as a whole … and some of the auction winners that have begun extracting those first barrels,” Trevino said.

Since the beginning of public bidding rounds in 2015, Mexico has awarded 107 contracts for exploration and extraction. Independent crude production in January, the latest data available, reached 2,506 b/d, stemming from 13 onshore, mostly mature contracts awarded in late 2015.

But independent crude production is expected to ramp up this year and next, as larger shallow-water contracts enter their production phases.
Source: Argus

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