Abu Dhabi — The economics are clear - importing US shale oil has been a winning proposition for Mexico, the outgoing head of its state oil company said.
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Register NowTwo weeks ago, Pemex controversially received its first shipments of crude from abroad in more than two years - a cargo of light, sweet Bakken oil -- improving the efficiency of its key refineries and boosting margins, CEO Carlos Trevino said in an interview Tuesday.
It is a move that his successor should continue, for the health of Pemex and the benefit of Mexico's citizens, he said.
But the country's President-elect Andres Manuel Lopez Obrador, who takes office in December and will be installing political ally Octavio Romero Oropeza as Pemex's new CEO, has criticized the crude imports as a failed economic policy.
"We might put out another tender, but that will be a decision of the next CEO," Trevino said on the sidelines of the ADIPEC oil conference in Abu Dhabi. "In my personal point of view, he should do that. But I don't want to make a lot of comments on that. It's his decision."
Pemex in late October awarded a tender for four, 350,000-barrel cargoes of Bakken crude to Phillips 66, the first of which was delivered October 31 at the Port of Pajaritos in Veracruz.
Bakken crude typically has a 42.3 API and 0.12% sulfur. It is noted for its high cuts of naphtha (27%) and diesel/heating oil (21%).
It is also at the moment cheaper than Mexican-produced Maya crude, Trevino said, making it a "no brainer" to buy Bakken on the spot market.
"If you're running cheaper crude with a better efficiency in volume, it's a good economic idea," he said, explaining that running straight Maya crude in Pemex's refineries creates a product slate with about 47% high value products, while with Bakken, about 64% are high value.
S&P Global Platts does not publish yields for Mexican refineries. However, Bakken cracking yields regularly fetch a premium to Maya in US Gulf Coast. The USGC Bakken cracking yield has averaged $75.33/b so far in November, a $7.48/b premium to the Maya yield, Platts data shows.
The first cargo boosted the operating levels of Pemex's 315,000 b/d Tula refinery in the first week of November, helping Mexico recover from historically low crude processing levels, according to a company report Monday.
Lopez Obrador, however, sees the imports of US crude as a symptom of the decline of Mexico's once-thriving oil industry.
The purchased barrels are "another example of the great failure of neo-liberal economic policies in the last 30 years," Lopez Obrador said on Twitter.
Pemex has seen years of falling crude production, due to underinvestment and maturing fields.
It will produce 1.83 million b/d this year, Trevino said, down from a previous target of 1.95 million b/d.
The Bakken crude is intended to help fill the gap and enable the company's refineries, particularly the Salamanca, Salina Cruz and Tula facilities that lack coker units, to boost their runs, Trevino said.
Pemex's refining throughput stood at about 850,000 b/d before the imports, but with the Bakken barrels blended with Maya, the company will be capable of running 1 million b/d in December, once maintenances on the Madero and Minatitlan refineries are complete, he added.
Trevino, who ascended to the CEO post in September 2017, has guided the company through ambitious energy sector reforms implemented in 2016 by outgoing President Enrique Peno Nieto that include allowing private companies to invest in upstream oil production for the first time.
Lopez Obrador has been a critic of Mexico's energy liberalization but has not announced any concrete plans to reverse the reforms, nor undo the contracts Pemex has signed.
Trevino said it was still too early to judge the reform program's success, but Pemex has performed well in its projects.
"The energy sector is a very long-term kind of sector, so it's difficult to judge the energy reform three years after the regulation was made," Trevino said.
But to really help the company flourish, he said the incoming administration must streamline its regulatory processes.
Lopez Obrador's Morena party on Tuesday removed a controversial clause from a landmark bill that proposed to bring energy regulators under the control of Mexico's Energy Secretariat, potentially eliminating their independence.
Trevino said he was agnostic about the change in regulatory structure. But he said the new president should commit to transparency in reviewing contracts signed under the energy reforms.
"The Mexican people have to have the biggest transparency on how every contractor is performing," Trevino said. "Every company that signs a contract with the Mexican state, they commit an investment program. If you can review how they are performing to that program, you would have enough information to realize if that energy reform is working or not. That analysis has not been made."
-- Herman Wang, herman.wang@spglobal.com
-- Miriam Malek, miriam.malek@spglobal.com
-- Edited by Derek Sands, newsdesk@spglobal.com