Refinery Fires Force Mexico to Reverse Its Plan to Cut Oil Exports

Mexico has changed a plan to curb oil exports as fires at two Pemex refineries have affected local demand for the commodity.

According to Pemex employees who spoke to Bloomberg, the company had notified some U.S. buyers of its crude that it could offer additional cargos for May.

Earlier this month, reports said Pemex would reduce the rate of exports in order to feed local refineries, with Reuters putting the size of the cut at 436,000 barrels daily. For May, the export reduction was seen at 330,000 barrels daily.

The reduction in oil exports was necessary because Pemex’s output has been on a steady decline due to natural depletion and nowhere near enough new discoveries. In February, the daily average fell to the lowest in 45 years.

About a week ago, however, the Salina Cruz refinery suffered a fire that started at a gasoline tank and while the fire was quickly extinguished, the facility’s operations were disrupted. Then, a couple of days later, Mexican media reported an explosion had occurred at the Lazaro Cardenas refinery in Veracruz.

Separately, Pemex said in a recent update that the brand-new Dos Bocas refinery—a flagship project of the Lopez Obrador government’s energy policy—was going to reach its full capacity in September. This is six months behind schedule for the 340,000-bpd refinery.

The Mexican energy ministry expects oil processing rates in the country to rise to 1.04 million barrels daily this year. This, based on 2023 export figures suggests Mexico might well have to stop exporting crude as a whole if it plans to feed more crude oil to domestic refineries.

Last year, Pemex exported an average daily of 1.03 million barrels, according to Reuters. This year, the average for the first two months of the year fell to 945,000 barrels daily.

By Charles Kennedy for Oilprice.com

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