JERSEY CITY, New Jersey – The future of Mexico’s state-run base oil plant will be troubled if the government continues to not invest in the aging structure, industry analysts said Dec. 5 at the ICIS Pan American Base Oils & Lubricants Conference held here.
“The problems at Pemex‘s Salamanca Refinery are internal,” said Jamie Brunk, manager of lube studies for Solomon Associates. “It’s two [production] trains operating, two parallel trains. The Mexican government hasn’t invested in that plant for years,” Brunk said. “What they are doing is stealing from one train to keep the other one operating.”
Pemex officials did not respond to multiple requests for comment from Lube Report.
Pemex’s financial and leadership problems have filtered down to its base oil business. Brunk said the API Group I facility currently operates at half of its capacity, which is 6,000 barrels per day, according to the Lubes’n’Greases 2019 Guide to Global Base Oil Refining. The government planned a reconfiguration of the Salamanca plant in 2012, but political and financial issues – mainly the 2014 and 2016 plummet in oil prices – prevented Pemex from going through with the upgrades.
A drive by Mexico’s left-leaning President Andres Manuel Lopez Obrador to achieve a 1 percent government-wide surplus by the end of the year has led to slowed payments for Pemex contractors. Obrador pledged to shrink Pemex’s handicapping debt and long-term production declines. Currently, Pemex has approximately $100 billion in debt, the most of any major oil producer, and is one of the world’s most indebted companies.
“Mexico’s [output] dropped substantially, their production is down,” Brunk said. “Crude production is down, so they’re not exporting as much, and their refineries are not doing real well either.”
The problem is refinery management. Pemex has a culture of corruption and cronyism, attendees and speakers at the ICIS conference said. Many said in speeches and private conversations that more decision-making needs to be done at the refinery level instead of at the corporate headquarters.