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US becomes oil and petroleum net exporter; most shipments reach Latin America

At the end of November, the U.S. was a net exporter of crude oil and petroleum products for the first time since U.S. government record keeping began, according to estimates from the U.S. Energy Information Administration.

Citing weekly data going back to 1991, the EIA said during the week ended Nov. 30, the U.S. exported an estimated 3.2 million barrels per day of crude oil and an estimated 5.8 MMbbl/d of petroleum products, for total net exports of 211,000 bbl/d.

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"This single-week estimate is part of a long-term trend of declining imports of crude oil and increasing exports of petroleum products and more recently, crude oil," the EIA said Dec. 12 in its Today in Energy post.

With a highly complex refinery fleet that has the ability to process heavier, more sour grades of crude, the U.S. has been a net exporter of petroleum products since 2011.

Although the U.S. still imports more crude oil than it exports, discounted U.S. and Canadian crude oil have kept U.S. refinery runs at record-high levels.

"The increase in refinery output of petroleum products has outpaced growth in U.S. consumption of petroleum products such as distillate fuel oil, gasoline, and propane, leading to an increase in petroleum product exports," the EIA said. "As a result, the United States has been in a long-term trend of declining net imports of crude oil and petroleum products."

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Shipments to Latin America account for the bulk of the growth in U.S. petroleum exports, with the 77.5 MMbbl of petroleum products exported to those countries in September accounting for 47.0% of the month's 164.9 MMbbl total, according to data from the EIA.

That month, 35.3 MMbbl of exports to Mexico accounted for 21.4% of total U.S. petroleum exports.

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During a Dec. 4 analyst day presentation, Marathon Petroleum Corp. President of Refining, Marketing and Supply Donald Templin called Mexico "a very important part of our export strategy" and said that one-third of the company's exports from the Gulf Coast are shipped there. In addition to shipping light product into Central Mexico via truck and rail, Templin said Marathon is investing in infrastructure in Northwest Mexico, including a light product terminal in Rosarito and leased capacity in Sinaloa.

Experts expect trend to continue despite Mexican efforts toward energy independence

On Dec. 9, Mexican President Andrés Manuel López Obrador announced plans to shore up the country's refining industry through the rehabilitation of six refineries owned by national oil company Petróleos Mexicanos SA de CV, known as Pemex, and construction of a seventh in the Mexican state of Tobasco on the Gulf Coast.

The country aims to process 1.86 MMbbl/d of crude oil into 781,000 bbl/d of gasoline and 560,000 bbl/d of diesel fuel by 2022.

But experts are skeptical that the plan, which they say amounts to billions of dollars in capital investment, will enable Mexico to achieve energy independence in that time frame.

"Pemex has had similar plans for years and are now experiencing the lowest utilization rates they have ever had," John Auers, an executive vice president at refining consulting firm Turner Mason said Dec. 11. "I am very skeptical of their ability to run the existing refineries at [utilization] levels above 70% and even more skeptical that a new refinery will get built, especially on this kind of accelerated schedule."

"Based on the track records of Pemex and other companies in Latin America, I don't see them executing that sort of capital program effectively," Auers said. "While U.S. refiners on the Gulf Coast have become more dependent on exports to Mexico and other Latin American destinations and any improvements to or expansion of operations in those countries is a threat to that model, I don't think it will materialize, at least not in the next five years."

Marathon Executive Vice Chairman Greg Goff said Dec. 4 that the Mexican refining industry will have trouble coping with tougher marine fuel sulfur standards known as IMO 2020, as their refineries produce a higher amount of lower-value fuel oil at approximately 24% to 26% of total product yield against a U.S. fuel oil yield of approximately 2% to 3%.

"I think it's a major challenge particularly for Mexico with their configuration and their crude supply," Goff said. "They're going to have to make structural changes in their business to cope with the world going forward and they haven't shown the ability to do that yet."