Mexico will suspend crude oil exports in two years in an effort to focus on national self-sufficiency, Bloomberg reported.
The move is part of President Andres Manuel Lopez Obrador’s plan to increase local fuel production to reduce reliance on imported fuels.
The announcement of the phase-out of exports was made by Pemex Managing Director Octavio Romero, who also said Mexico will cut oil exports by more than 50% from next year, to 435 000 bpd.
Currently, Mexico is the Americas’ third largest oil exporter, after the United States and Canada, according to data from the US Energy Information Administration.
The main destinations for its crude are its northern neighbors in North America and China, India and South Korea, as well as European countries. A drop in exports could push some of these importers to seek alternative suppliers.
Fuel demand in Mexico increased during the pandemic, but local oil production did not keep pace. Refining capacity is also an issue, although President Lopez Obrador’s plans include building a new refinery with a capacity of 340,000 bpd. The refinery is priced at $ 12.4 billion, according to calculations at the start of the year, as reported by Argus.
If Mexico does indeed stop exporting crude oil, it will hit America’s Gulf Coast refiners hard, as it will cut off yet another source of heavy oil, for which their refineries have been configured. Venezuela was another major source of heavy crude, but U.S. sanctions against Caracas halted the flow of Venezuelan heavy crude to the Gulf Coast.
According to the Bloomberg report, there are also doubts about Pemex’s ability to refine all of its crude oil production. A long period of underinvestment in refinery maintenance has dramatically reduced operating capacity, and it is questionable whether the national energy giant would be able to turn things around in just two years.
Pemex is currently the most indebted oil company in the world despite significant efforts by the Lopez Obrador government to back it up with tax breaks and other debt relief measures.
By Charles Kennedy for Oil chauffage
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