Mexican reforms may boost refining capacity

Interview story by Al Greenwood

HOUSTON (ICIS)–Mexico’s recently adopted energy reforms will initiate a series of steps that could result in the country increasing refining capacity, a consultant said on Monday.

Mexico has amended its constitution to open up its energy industry for the first time in 75 years.

As part of those reforms, President Enrique Pena Nieto recently signed secondary laws that define the terms and the scope of private participation in the country’s energy sector.

Under the reforms, companies other than Pemex can participate in oil and natural gas production as well as refining.

New refining capacity could decrease Mexico’s large fuel trade-deficit and it could increase supplies of petrochemical feedstocks.

Benzene, toluene and xylenes (BTX) are produced in a refinery’s catalytic reformer. Propylene is produced in a refinery’s fluid catalytic cracker (FCC).

Any increase in capacity will be some years off, said Jorge Castilla, energy leader at Deloitte Consulting Mexico.

Mexico will initially concentrate on exploration and production (E&P), he said. Moreover, the reforms that could lead to refining expansion will occur in the upcoming years.

In 2016, Mexico will allow retailers other than Pemex to sell gasoline and diesel, Castilla said. Currently, only Pemex, the state-owned producer, is allowed to sell fuel.

In 2018, fuel retailers can purchase fuel from suppliers other than Pemex, Castilla said. This will open up Mexico’s fuel market and put an end to the government setting prices on fuel.

By 2019, fuel prices in Mexico should be set by the market, he said.

Market pricing should raise confidence and encourage investments in Mexico’s refining industry.

Looking ahead, Castilla said Pemex may divest some of its refining assets. It may also establish joint ventures.