Mexico refinery debate: More assets should be under the microscope

Mexico’s debate over the future of two of its eight refineries could be the beginning of a thorough review of all assets under the control of state-run oil and gas company Pemex and national power utility CFE.

While President Andrés Manuel López Obrador's administration has not been fully transparent about the status of all its assets, the campaigns for the June 2 general election have brought contrasting proposals from the ruling party's presidential frontrunner Claudia Sheinbaum and opposition candidate Xóchitl Gálvez, sparking a renewed debate about the energy transition.

“That the Pemex debate – and I hope the CFE debate – begins asset by asset seems like a success. I only hope that whenever something like this is proposed, it is accompanied by a public cost-benefit analysis, including economic and environmental factors," Pablo Zárate, senior managing director at FTI Consulting, told BNamericas. 

"Otherwise, it risks ending up as purely public relations or a populist measure”  

During a campaign stop in Nuevo León state on Thursday, Sheinbaum said none of the country’s refineries would be closed if she were elected president. Her comments came as a response to Gálvez, who has proposed shutting down Nuevo León's Cadereyta refinery along with the Madero refinery in Tamaulipas over pollution concerns. Galvez has asked López Obrador to release pollution data for all eight refineries.

Experts mostly agree that the 44-year-old Cadereyta and the 109-year-old Madero refineries are outdated and losing money. 

On March 18, the 86th anniversary of the expropriation of assets of foreign oil companies operating in Mexico, Pemex CEO Octavio Romero Oropeza said that his administration has rehabilitated its six refineries – Cadereyta, Madero, Minatitlán in Veracruz, Tula in Hidalgo, Salamanca in Guanajuato and Salina Cruz in Oaxaca – leading crude oil processing to jump 154% compared to late 2018 when López Obrador came to power. 

The López Obrador administration also built the Dos Bocas refinery in Tabasco state and acquired the Deer Park refinery in Texas as part of its quest to gain energy self-sufficiency. Romero said that Dos Bocas, also known as Olmeca, will reach 1.7Mb per day by September, while Deer Park will achieve “its best results in the last decade.”

While the political debate has centered on Cadereyta and Madero, Zárate says other assets present an even bigger environmental concern.

“There has been a kind of blanket impunity for Pemex and CFE assets. Many of them pollute excessively and have unusual losses, and yet they continue to operate. Minatitlán has lost a tremendous amount of use value: there is write-down after write-down and now it pollutes more,” he said. 

“Cadereyta, as you know, has become an icon of pollution. But on CFE's side, assets like thermal plants Petacalco and Tula should be under the microscope as well.”