Pemex crude export ban would shift USGC M&As, flows

Pemex's ambitious plan to hoard Mexico's crude supply - even if only partially implemented - could reverberate in the merger and acquisition marketplace around US refineries.

State-owned Pemex still needs to overcome technical obstacles if it is to stop exporting crude as part of its goal of making Mexico self-sufficient for fuels. The plan would likely require a significant increase in domestic refining capacity, as well as a more pragmatic business plan.

Still, the company's stated goal to cease exports by 2024 to instead refine its crude production domestically could muddy the waters around deals involving refineries in the US Gulf coast, where Mexican crude is an integral part of the crude feedstock mix.

LyondellBasell placed its 268,000 b/d Houston Refinery up for sale last year as part of a strategic focus on chemicals, but potential buyers would likely need to have a plan for changing the facility's crude sourcing in the event of a Pemex export reversal. The Houston Refinery imported 5.609mn bl, or almost 61,000 b/d, from Mexico in the three months ending October of last year, the third highest among US refineries, according to Energy Information Administration (EIA) data.

LyondellBasell said in the fourth quarter of 2021 that it was looking to wrap a sale of the refinery in the "next quarter or two," with an eye on securing a buyer that could fold the facility into a larger refining system.

Colombia's Ecopetrol stands out as another frequent supplier of crude to the facility, sending around 6mn bl to the LyondellBasell facility in the three-month period ended October. John Auers, executive vice president at Turner, Mason & Company, said in November that the Colombian company could make sense as a buyer for the Houston refinery given that commercial relationship.

Despite the issues, Mexican president Andres Manuel Lopez Obrador insists that crude exports hurt Mexico economically and is as illogical as selling oranges and buying orange juice for a higher price.

Pemex forecasts exporting 435,000 b/d of crude in 2022, 57pc less than in 2021, which represents 22pc of the 1.944mn b/d of expected crude production. That is down from 1.019mn b/d of crude exported in 2021, which represented 59pc of the 1.733mn b/d of 2021 crude production.

By Sergio Meana and Dylan Chase