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Light crude imports help Mexico's Pemex to boost Tula refinery's output

Highlights

Pemex's overall crude processing level recovers to 565,000 b/d

Bakken crude helps to cut Tula's fuel oil yield to 37%

Mexico City — Pemex's 315,000 b/d Tula refinery saw a substantial boost in its operating levels in the first week of November, helping Mexico to recover from historically low crude processing levels, according to a company report released Monday.

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Tula processed 241,000 b/d in the week that ended November 4, compared with 85,000 b/d in the week that ended October 21.

In less than a month, Tula moved from processing its lowest volume recorded for any week in the year to the highest.

This allowed Pemex to significantly boost its overall crude processing level to 565,000 b/d from an all-time record low of 425,800 b/d two weeks earlier. Pemex began November with a refinery utilization rate of 32.66%.

This recovery came as Mexico heads toward its peak driving season in December, when it will depend mostly on gasoline and diesel imports from the US to fulfill demand.

Pemex's communication team confirmed to S&P Global Platts on Monday that Tula was able to boost its crude processing levels due to imports of light crude. Tula has a configuration that prevents it from efficiently processing Mexican heavy crude oil.

On October 22, Pemex awarded a tender for four 350,000-barrel cargoes of light Bakken crude to Phillips 66 with delivery expected to be in November. 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%).

According to data provided by S&P Global Platts Analytics' cFlow trade flow software, the first of these cargoes was delivered by the SFC Prime on October 31 at the Port of Pajaritos in Veracruz. It was the first time since 2016 that Pemex had imported crude for its refineries.

"Our focus isn't to increase our volumetric processing levels but profitability," Pemex's communication office said in a statement, adding that this strategy seeks to increase the output of high-value refined products with a better return.

This has led the company's downstream subsidiary to be profitable for the first time in many decades, Pemex previously said. The company has mostly limited its domestic refinery processing due to the relatively high yield of residual fuel oil compared with gasoline and the resultant low profits.

NEW DIET CUTS FUEL OIL YIELD

According to the report, Tula's fuel oil yield decreased by 6.2 percentage points to 37% in the first week of November compared with mid-October. However, the crude diet change resulted in higher diesel output at the expense of gasoline production.

Tula had a 16% diesel and 32.5% gasoline output yield in the first week of November, compared with 44.2% of gasoline and 10.3% diesel in mid-October.

According to the report, Tula had eight processing plants that were offline in September compared with one in October, indicating a portion of the refinery underwent maintenance in recent months.

Looking forward, the Tula facility is expected to increase its crude processing level as the company completes a rehabilitation of the refinery's 50,000 b/d residual hydrocracking unit (H-Oil plant). The company in May awarded a contract to Italy's Saipem to repair and enhance the unit.

The contract has a completion date for the work of November 22, although analysts reached at the time it was awarded said the timeline was ambitious and likely hard to meet.

The work on the plant is essential for Pemex, helping it to address stringent domestic ULSD regulations that will come into effect in 2019, as well as lower sulfur requirements for global marine fuel set to become effective in 2020.

According to Platts Analytics, the estimated yield of the H-Oil plant is 30% low sulfur diesel, 25% low sulfur fuel, 35% vacuum gasoil, and 10% naphtha.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com