Forbes says Pemex faces high investment risk in the purchase of the Shell refinery

Photo: (Forbes)

The refinery has faced losses for two years as the US government tightens its policy on fossil fuels.

MEXICO, May 25, 2021, (FORBES).- The company Petróleos Mexicanos (Pemex) and the Federal Government face a high long-term investment risk in the purchase of a refinery from Shell in the United States for 596 million US dollars, according to analysts and data from the Mexican company itself.

For starters, the Mexican oil company has faced significant losses from the Deer Park refinery in the last two years. The red numbers amount to 4,056 million pesos during 2020 and 1,438 million pesos in 2019, according to its annual report sent to the US Securities and Exchange Commission (SEC, for its acronym in English).

On the other hand, there is an economic risk factor in the efficiency of refineries on the US Gulf Coast.

Se recibe cascajo. AMLO compra Deer Park, una refinería con finanzas en  quiebra
LOSE PROFITABILITY. Pemex’s net result at the Deer Park refinery, in mmdp Photo: (El Financiero)

“They are major exporters of refined products,” said Felipe Pérez, director of consulting and midstream and downstream energy markets for the firm IHS Markit, in an interview.

Another risk for this investment is the green policy of the US government of Joe Biden, which seeks to decontrol its economy – after the fracking revolution – will complicate the operation of this type of business.

“The purchase faces a very high risk in the face of Biden’s clean energy revolution: decontrolling its economy to reduce polluting emissions and curb global warming,” said Marco Cota, CEO of the consulting firm Talanza Energy, in an interview.

The Democrat president established a politics to reduce global warming and achieve that the economy produces zero net emissions by 2050 while promoting the massive use of electric vehicles during his administration. Even the government of California, one of the world’s largest fuel consumption markets, will ban the sale of vehicles that use fossil fuels in 2035.

The analyst recalled that Shell’s divestment in refining is not surprising because the company aligned itself with the Paris Agreement to prevent the planet’s temperature from increasing by 1.5 degrees Celsius, and has sold other refineries, even though one of the criticisms of the oil sector is that large companies like Shell will sell polluting infrastructure to small companies that have no environmental commitments.

In 1993, Pemex partnered with Shell and bought 49.9% of Deer Park to process Maya crude (heavy), while the private company would be in charge of the operation of the refinery.

Headquartered in Houston, Texas, the mega-site has a light and heavy crude oil processing capacity of 340,000 barrels per day without generating fuel oil. It produces around 110,000 barrels per day of gasoline, 90,000 of diesel, and 25,000 of jet fuel, with a performance above 80%, while Mexican refineries have operated below 40% in the last four years.

“This acquisition will be fully financed by the Federal Government and the purchase-sale operation is scheduled to close in the last quarter of the year, subject to the approval of the regulatory bodies of the United States Government,” Pemex added in a statement.

Source: Forbes

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