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Lopez Obrador says to reveal plans in August for boosting refining; sees India as good example

Mexico City — Mexican President-elect Andres Manuel Lopez Obrador said Thursday he would reveal in August his plan to reconfigure state Pemex's existing refineries and to build two more under an open tender scheme.

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"Very soon, in a month, we are going to have the plan to build the refineries, we are going to disclose the plan, when it is going to start, and where they are going to be built," Lopez Obrador told Mexican television.

Lopez Obrador said he would hold a public auction to build these refineries and to reconfigure existing facilities owned by Pemex.

Pemex has six refineries with a combined crude processing capacity of 1.6 million b/d. However, three of these facilities -- 220,000 b/d Salamanca, 315,000 b/d Tula and 330,000 b/d Salina Cruz -- have simple configurations. As a result, these refineries cannot operate at full capacity without incurring a loss while processing Pemex's heavy crude oil production. All these refineries also require new units to produce ultra-low sulfur diesel.

Lopez Obrador also said his administration would seek to increase Mexico's oil production.

"We also have to solve the crisis of our oil output," he said. "Our oil production is failing, and we can't refine if one doesn't have crude oil."

A key goal of Lopez Obrador's administration is to transform Mexico into an energy independent nation, he said during his victory on Sunday.

In September, Pemex's crude processing levels reached a historically low level, processing only 537,140 b/d. This was just enough supply 35.6% of Mexico's gasoline demand. In May, Pemex processed 684,750 b/d. Mexico is the world's fourth-largest gasoline market and an important export destination for US Gulf refiners, which exported as much as 1 million b/d to Mexico in 2017.

Pemex's refining operations have been affected by an austerity plan implemented after oil prices crashed in 2014. The company's refining budget was cut in half, affecting their maintenance program, improvement projects and overall reliability.

Pemex has been seeking partners since then to improve its refining operations. To date, it has awarded contracts to improve its hydrogen supply but has failed partners to reconfigure its refineries.

Lopez Obrador has discussed the construction by Pemex of new two refineries in the states of Tabasco and Campache, with a combined capacity of 300,000 b/d and each costing $6 billion. Combined, the two refineries would produce an additional 275,000 b/d of gasoline, he said. Lopez Obrador has promised to quickly improve Mexico's refining sector, with work on the two new refineries to start in December and be complete within three years.

Rocio Nahle, tapped as Mexico's energy secretary by Lopez Obrador, told Mexican television on Wednesday that she would traveling to India to analyze India's refining sector. She said that she is interested in learning more about Reliance Industries' 1.24 million b/d Jamnagar refinery, the world's largest. The facility is in the Indian state of Gujarat.

"That refinery is a very successful project that we want to replicate here with our capacity and the technologies we select," Nahle said.

According to the Indian commerce ministry, state-owned companies own 19 out of 21 refineries in the country, or 63% of its 4.6 million b/d crude processing capacity.

-- Daniel Rodriguez, newsdesk@spglobal.com

-- Edited by Richard Rubin, richard.rubin@spglobal.com