Mexico City — Pemex's buying of four US Bakken crude cargoes should help it maximize the efficiency of its 330,000 b/d Salina Cruz refinery, although future imports are no sure thing as they are opposed by Mexico's incoming administration, an S&P Global Platts analysis showed Tuesday.
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This strategic move is key as Mexico seeks to maximize gasoline output and curtail residual fuel oil output from underperforming refineries, in particular from Salina Cruz.
Phillips 66 confirmed Tuesday it was awarded a tender for the supply of four out of six 350,000-barrel Bakken cargoes, to be delivered in November at the southern Mexican port of Pajaritos. While Pemex has not confirmed if these cargoes would head to its Salina Cruz refinery, a previous tender for Light Louisiana Sweet -- since voided -- had stipulated the crude would head to Salina Cruz.
Salina Cruz has been operating well below capacity because of lower Mexican light crude production, which has fallen to 759,250 b/d in August from 1.16 million b/d in 2014. The refinery processed just 124,000 b/d of crude the second week of October, and yielded 35% fuel oil, Pemex data shows.
Mexican refineries lack the coking capacity needed to run heavy Mexican crudes, and thus produce an abundance of relatively low-value residual fuels.
Bakken crude is noted for its high gasoline yields and low resid yields, especially compared to Maya crude, something likely not lost on Pemex.
In the nearby US Gulf Coast, Bakken cracking yields typically outperform those for Maya by around $10/b. For example, Bakken cracking yields on the USGC have averaged over $88/b so far this month, compared to just $78/b for Maya.
S&P Global Platts crude yields are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
S&P Global Platts Analytics estimates the Bakken crude cargoes will help to raise Salina Cruz's crude processing levels by 45,000 b/d while boosting the production of low sulfur refined products.
Bakken volumes for export have largely been limited to date. But an expansion of Energy Transfer Partners' Bakken Pipeline System -- an open season was announced late last week -- would bring more Bakken into the Gulf Coast, possibly freeing up more barrels for export.
A senior official at Mexico's Energy Secretariat (SENER), who asked not to be identified, told S&P Global Platts last week that running more light sweet grades would help cut Salina Cruz's fuel oil yield by 10-16%.
Luis Miguel Labardini, a partner with Mexican energy consulting firm Marcos y Asociados, agreed.
"This isn't rocket science. A large share of the problems in (Pemex's) refineries is that they aren't receiving the light feedstock they require," he said.
Out of the 669,600 b/d of crude oil Mexican refineries processed in August, 404,250 b/d was light crude oil, SENER data shows.
Labardini said Pemex could increase its total crude processing levels to 50-60% of capacity from 30% today if it had access to enough light crude feedstock.
Going forward, Labardini said he hopes the incoming Andres Manuel Lopez Obrador administration will continue the import of light crude oil to boost refining output.
"Even if the next government rises crude oil production, there will be the need to do crude swaps for light oil," he added.
Doing crude swaps is a more economical alternative than reconfiguring existing refineries by installing expensive cracking capacity, something Lopez Obrador has said would cost Peso 166 billion ($8.58 billion).
However, importing more light crude may not be in the cards. On Tuesday, Lopez Obrador criticized via Twitter Pemex's light crude imports, saying this was "another proof of the great failure the neoliberal policy... had over the last 30 years."
Labardini said the energy reform was the result of the problems created by decades of the strict Mexican state monopoly over the energy sector led by state oil company Pemex.
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