Mexico’s New Government Offers Nothing New with its Refining Optimization Strategy

Following a recent statement by Rocio Nahle, the next Ministry of Energy of Mexico, where she states that US$2bn will be spent on optimizing the country’s existing refineries, Adrian Lara, Senior Oil and Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the impact on the upstream sector:

“There is nothing new with this expenditure announcement. However it is somehow a signal that the next government will prioritize optimizing the refining system, as much as trying to build new refineries. Obviously the money is limited and so investing in both strategies at the same time will not be possible. Pemex already knows what is needed to invest in its refineries’ maintenance, and in that sense it is easier to start with that.

‘‘Indeed the US$2.04bn (MXN$38bn) the new government plans to spend is already approved and being spent by Pemex during 2018. There is really no change to the total amount. What the next Ministry of Energy is saying is that they will re-organize current expenses and direct everything to maintenance. However, about 87% is already allocated to maintenance and restoring equipment.

“For 2019 and 2020 Pemex downstream division has already requested approximately US$3.7bn and US$3.8bn including maintenance and new infrastructure for the plants. Reducing expenses on administrative acquisitions such as computers and air conditioning, as the next Minister says, will not be enough to fund this future budget. Most likely this funding will continue to be a combination of Pemex’s own cash flows and issued debt.”

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