The potential decrease in crude oil supplies from Mexico, the primary international supplier to the U.S. Gulf Coast, has stirred uncertainty among refineries focused on heavy crude. Petróleos Mexicanos (Pemex), Mexico’s state-owned energy company, has instructed its trading unit to cancel up to 436 Mb/d of crude exports for April. This decision supposedly aims to prioritize processing domestic oil at its new Dos Bocas refinery and/or its existing plants. However, doubts linger regarding the refinery’s imminent startup, prompting concerns among heavy crude-focused refineries in the USGC, where heavy crude is essential for optimizing operations and yields.
The situation is further complicated by the forthcoming startup of the Trans Mountain Pipeline expansion and the recent reinstatement of U.S. sanctions on Venezuelan crude. These developments occur at a time when heavy crudes are becoming less available globally, adding to the challenges faced by USGC refineries.
While Mexico’s energy ministry projects substantial increases in domestic crude oil processing, RBN’s downstream consulting practice, Refined Fuels Analytics, holds a different perspective on the future of Dos Bocas. RFA anticipates that Dos Bocas may not achieve significant fuel output until 2026, with full ramp-up extending to 2028, assuming it reaches operational levels at all. This projection contradicts Pemex’s optimistic outlook, which envisages Dos Bocas reaching full capacity by 2024.
The cancellation of Mexican crude imports, particularly of the flagship grade Maya, is expected to impact USGC refineries heavily reliant on this grade. Maya dominates the Mexican export market and any reduction in its availability could disrupt global crude markets. Moreover, uncertainties persist regarding Pemex’s ability to implement these export cuts, as recent incidents such as fires at its refineries have prompted the company to offer more crude cargoes to customers.
In light of these developments, USGC refineries may need to seek alternatives to maintain their utilization rates, potentially leading to increased reliance on domestic crude. However, transitioning feed slates is a complex process, particularly for refineries built to run heavy crude. Consequently, a shortage of Maya crude could result in decreased refinery utilization rates, impacting overall crude runs and potentially tightening U.S. exports in the future.
As the situation unfolds, USGC refineries must navigate these challenges and explore alternative feedstocks to mitigate the potential impact of reduced Mexican crude supplies.
For more information please visit www.rbnenergy.com
