Should Mexico shut down 2 refineries?

The debate over the future of two of Mexico’s seven oil refineries has heated the presidential race ahead of the June 2 elections.

The leading presidential candidate for the opposition, senator Xóchitl Gálvez, has proposed shutting down the 44-year-old Cadereyta and the 109-year-old Madero refineries in Nuevo León and Tamaulipas states, respectively, because of the alleged health risks they pose to the metropolitan areas of Monterrey and Tampico. 

Gálvez said that Cadereyta lost 4bn pesos (US$238mn) in the 2020-22 period, while Madero was in the red for 26bn pesos.

In response, President Andrés Manuel López Obrador said neither refinery would be closed, citing the need to protect jobs at state-owned Pemex and limit dependence on US imports.

Gonzalo Monroy, managing director at energy consultancy GMEC, says that Madero needs some US$4bn in investments to recoup production losses, though that would still not guarantee the refinery's return to profitability.

“It's quite possible that the Madero refinery is beyond salvation," he tells BNamericas. "Cadereyta is more complicated because, unlike Madero, it runs 100% on pure Mayan heavy crude oil and, obviously, what they are taking out in a two-to-one ratio is fuel oil rather than gasoline. Cadereyta does not have the level of abandonment or need for investments that Madero has." 

Local authorities, including Nuevo León state governor Samuel García, have pushed for legislation and legal lawsuits against Pemex to close down the refinery because of its air pollution. 

In a press conference on Monday, Gálvez said about 4,000 workers affected by the refineries' closure would be relocated to clean energy jobs, though she didn't provide further details.

Ever since the Andrés Manuel López Obrador administration took office in late 2018 it has pushed Pemex to ramp up its refining capacity to produce enough fuels to meet domestic demand by end-2023.

To make Mexico fuel self-sufficient, López Obrador tasked Pemex and the energy ministry with implementing the plan, which includes the 62.9bn-peso rehabilitation of the country’s six refineries, the US$600mn acquisition of the Deer Park refinery in Texas and the construction of the US$16bn Olmeca refinery in Dos Bocas, Tabasco state. 

BNamericas reported at the end of October that Mexico’s production and refining goals to achieve fuel self-sufficiency were not advancing as planned.

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