Mexico defends the purchase of a loss-making refinery in Houston

The purchase has received criticism because the plant lost US$1.438 billion in 2019 and US$4.056 billion in 2020, denounced the right-wing National Action Party (PAN), the government's main opponent.

RIO DE JANEIRO, BRAZIL – The Mexican government defended this Wednesday the purchase for US$596 million of Shell’s Deer Park refinery in Houston, Texas, an operation questioned for the alleged losses of the plant.

“There are no losses, there are no losses, it is that oil is the best business in the world, there were losses when corruption prevailed”, declared President Andrés Manuel López Obrador in his daily press conference, in which the Board of Directors of Petróleos Mexicanos (Pemex) was present.

Shell's Deer Park refinery in Houston, Texas
Shell’s Deer Park refinery in Houston, Texas. (Photo internet reproduction)

Pemex’s CEO, Octavio Romero Oropeza, detailed that the state-owned oil company held 49.95% of the shares after a 1993 association with Shell, which controlled the remaining 50.05%, which he expects to finalize the transaction in the last quarter of this year.

The operation, which also includes the crude and oil inventory, will consist of US$106 million in cash and US$490 million of Shell’s debt, Oropeza said.

The refinery has a capacity of 340,000 barrels per day, of which 110,000 are gasoline, 90,000 diesel, 90,000 turbosine, and the rest other products, said the Pemex director.

“It will be a significant step towards the fulfillment of the self-sufficiency in fuel production proposed by the President of the Republic”, he said.

A PROFIT?

But the purchase has received criticism because Deer Park lost US$1.438 billion in 2019 and US$4.056 billion in 2020, denounced the right-wing National Action Party (PAN), the government’s main opponent.

“The reports to the US stock exchange said that this refinery was not profitable, that it was not viable, why then is Pemex buying a refinery that loses money?” questioned Julen Rementería, leader of the PAN bench in the Senate, in a video message.

The acquisition also causes controversy because it costs less than 10% of the almost US$9 billion the government is allocating to build a refinery in Tabasco, in the southeast of the country, which will have the same production of 340,000 barrels per day.

“For Mexico to have more refining capacity, the purchase of the Deer Park refinery would have been a more efficient solution than starting the construction of Dos Bocas, lower cost and immediate refining capacity,” said the association Mexico, ¿Cómo Vamos?.

Pressed by the press, the director of Pemex admitted that the Houston plant has a debt of US$980 million. Still, the president asserted that there are reserves of 30 billion pesos (about US$1.5 billion) available for Pemex.

“The specific financial analysis for this has already been done, it is a good business for the country”, insisted López Obrador.

BLACK FUTURE

The “rescue” of the state-owned company Pemex and the oil is one of the main objectives of López Obrador, who reiterated the goal of producing 1.8 million barrels of fuel per day to be used exclusively for gasoline for national consumption.

But the state-owned oil company, the most indebted in the world, lost US$21.4 billion in 2020 in “the biggest crisis” of its history, according to the company itself, which in the first quarter of 2021 still registered losses of US$1.8 billion.

Even so, Pemex’s Board of Directors unanimously approved the purchase and came to its defense.

On behalf of the Board, Laura Itzel Castillo criticized that during the “neoliberal period”, from 2001 to 2018, gasoline imports increased 11 times and diesel imports 56 times.

“Mexico must conduct its energy transition policy in an orderly and rational manner based on the renewable and non-renewable resources it possesses, mainly oil, which is why, Mr. President, we congratulate you on such a patriotic decision,” concluded the councilor.

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