Mexico makes up for delays: seeks more agreements to bring in more fuels

MEXICO CITY — Mexico is seeking to import more fuel than it had previously planned for 2025 to make up for delays in starting up its new Olmeca refinery, a half-dozen traders said, marking a U-turn by state oil company Pemex.

Purchases for next year suggest the refinery may not be ready soon, a hurdle for the legacy of President Andres Manuel Lopez Obrador, who began building it after being elected in 2018 promising to end costly imports.

Pemex is a major crude producer but relies heavily on gasoline and diesel imports as its six aging refineries struggle to process its heavy Maya crude, producing record amounts of fuel oil instead.

Earlier this year, the oil company told suppliers it planned to significantly cut imports of both fuels as the 340,000 barrel-per-day (bpd) refinery was finally running at capacity, market sources said.

However, Reuters reported last month that the Olmeca refinery is unlikely to produce commercially viable fuels before the end of 2024, as engineers were still working on key parts more than two years after its inauguration.

The International Energy Agency was also skeptical. In a report in June, it said the refinery was unlikely to come online before the fourth quarter of next year.

Reuters was unable to determine by how much Pemex had previously planned to cut imports for next year. However, Mexico is now back in the market seeking deals to guarantee fuel supplies for the rest of this year and next and has made inquiries in the United States and across Asia, oil traders said.

Pemex is seeking volumes similar to those it imported before, according to a trader at a major commodities company. This was confirmed by another US trader who works for a major Latin American refinery.

Over the past two weeks, they have also held consultations with Chinese refiners but no agreement has yet been reached, two Asian traders said.

The new supply agreements for 2025 would contradict statements by Pemex CEO Octavio Romero earlier this month that Mexico would drastically reduce fuel imports in the coming months.

“The Olmeca refinery would start up in the next few days,” he said. “The new coking units at the Tula and Salina Cruz refineries will also boost production above national demand and Pemex would have a surplus,” he added.

In the first five months of the year, Pemex produced 306,547 bpd of gasoline and 181,565 bpd of diesel at its six domestic refineries, according to official data. It imported 358,545 bpd of gasoline and 128,215 bpd of diesel.

Shortages are expected

Without the new refinery working at full capacity, lower imports could cause a fuel shortage next year that would be an embarrassment for the current government and incoming President Claudia Sheinbaum, three Mexican traders said.

Pemex and the government have delayed the start-up date of the refinery, whose cost has doubled to reach 17 billion dollars.

Mexico typically imports most of its fuel from the United States because shipping from Asia takes longer and is more expensive, although price swings in that region can make arbitrage profitable.— Reuters

Pemex has purchased at least three spot shipments of gasoline for early August in the past week, weighing around 300,000 barrels each, from Asia – probably China and Singapore – as the arbitrage was profitable, traders said.

However, shipping cargoes from Northeast or Southeast Asia to Mexico on a forward contractual basis would be more difficult, as it means the arbitrage must be profitable over the entire period.

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