AMLO seeks to build a new refinery for Mexico

Bloomberg

Mexico’s future energy minister was looking for inspiration two years ago when she toured the world’s largest refining complex, a 7,500-acre maze of industrial plants and pipes in India where more than a million barrels of oil can be turned into fuel and petrochemical products each day.
Rocio Nahle, who became energy minister under Mexico’s new government in December, thinks the country can replicate Reliance Industries Ltd’s Jamnagar refining compound. But there are a few snags.
Mexico is proposing to build a new refinery for $8 billion in three years, the amount of time and money it took Reliance to complete just a single phase of its complex. And Mexico plans to do so without using private funds, creating a strain on public coffers and calling into question the efficiency of a state-owned facility when the country’s six refineries are already losing more money the more fuels they produce.
Investors and analysts aren’t impressed. “It doesn’t make sense,” said Lisa Viscidi, director of the Energy, Climate Change & Extractive Industries program at Inter-American Dialogue, a Latin America-focussed think tank in Washington.
But for President Andres Manuel Lopez Obrador, it is a mission. He has been deaf to the pleas of bondholders who want Pemex to focus on the core business of drilling rather than diverting its attention to the construction of another refinery — widely viewed as an expensive symbol of the president’s goal to curtail the involvement and influence of foreign companies and countries in Mexico’s oil business.
Mexico’s own refineries are operating at about 35 percent of their capacity because Pemex hasn’t had the funds to invest in them, making the country reliant on foreign fuels to meet domestic demand.
About 65 percent of the gasoline that Pemex sells in Mexico is imported, mostly from the US.
As plans go forward for the Dos Bocas refinery — in Lopez Obrador’s home state of Tabasco — questions about the viability mount. Pemex has recorded a loss in adjusted income every year since 2013, and production has been sinking for 14 years.
It’s five-year business plan the company released this month didn’t go over well with investors. The worry is that without help from the private sector, Pemex is on track for another downgrade after Fitch Ratings Inc. cut its bonds to junk last month.