Sunday, July 21, 2024

Almost 2 years after inauguration, the Olmeca Refinery is still not fully operational

There has been some positive news of late about Pemex’s new Olmeca Refinery on Mexico’s Gulf coast in Dos Bocas, Tabasco.

It was reported last week that the refinery was set to reach an output of 73,000 barrels per day (bpd) of ultra-low sulfur diesel (ULSD), and high-ranking Pemex official Leopoldo Figueroa said that gas stations near the refinery, located in the municipality of Paraíso, had begun receiving that diesel.

Olmeca Refinery entrance with Olmec head
The Olmeca Refinery is one of AMLO’s major infrastructure projects and part of his administration’s plans to reach fuel self-sufficiency. (Gob MX)

In addition, Pemex CEO Octavio Romero said last Thursday that the refinery would operate “at full capacity” next month.

But the Reuters news agency published a report on Monday that painted a much less favorable picture of the multi-billion-dollar refinery President Andrés Manuel López Obrador inaugurated in July 2022, even though it wasn’t finished.

In a report that cited “five sources familiar with the operations” at the refinery, Reuters said that “Pemex officials had sought to demonstrate the refinery was operational by bringing a cargo of high-sulfur diesel to the Olmeca refinery to be turned into ultra-low-sulfur diesel.”

However, the USLD was “not produced from crude oil as is the plan,” Reuters said.

AMLO at the inauguration of the Olmeca Refinery in 2022
AMLO inaugurated the Olmeca Refinery in July 2022. (Lopezobrador.org.mx)

What is more concerning is that the five sources, including engineers working at the refinery, told the news agency that Pemex is unlikely to produce any commercially viable motor fuels at the refinery before the end of the year.

The refinery — construction of which began in 2019 and whose cost has blown out to at least US $16.8 billion — is eventually slated to have the capacity to refine 340,000 bpd of crude per day.

Reuters’ sources said that getting the refinery to a “full capacity” operational level in July, as Romero said would occur, is impossible. They also said that progress at the facility was exaggerated in the lead-up to the June 2 presidential election, which ruling Morena party candidate Claudia Sheinbaum won in a landslide.

Two sources, both engineers with “detailed knowledge of the operations,” told Reuters that technicians were still working on individual parts of the refinery and would subsequently be tasked with the even more challenging task of linking them together.

Alkylation unit at the Olmeca Refinery
According to the sources quoted by Reuters, while the refinery is technically sound, it is months away from producing viable commercial motor fuel. (Refinería Olmeca-Dos Bocas/X)

One source described the interconnection challenge as an extremely complex and “agonizing” trial and error process that would take months.

The other engineer said that the first of two production lines could be completed in October and November, but only in the most optimistic of scenarios.

“Technically and operationally, the refinery is fine so far but the problem is the expectations that have been created,” the source told Reuters.

He said that information announced by government officials “doesn’t take into consideration more technical criteria” about how an oil refinery works.

On a positive note, Reuters reported that none of its five sources “said the construction of the refinery was inherently flawed.”

It also reported that the sources said “it is too early to determine how the delay would affect public finances because refining margins are not known.”

Olmeca refinery Tabasco
Pemex director Octavio Romero (second from right) on a November visit to the Olmeca Refinery. (Pemex/X)

López Obrador, a staunch energy nationalist, had hoped that Mexico would reach self-sufficiency for gasoline during his six-year term in office.

In addition to building the new refinery in AMLO’s home state of Tabasco, the current federal government has invested heavily in the rehabilitation of Pemex’s six existing refineries in Mexico, and purchased Shell’s stake in one the state oil company jointly owned in Texas.

But Mexico still imports significant quantities of fuel, and the soonest self-sufficiency can be achieved, according to projections Romero presented in January, is 2027.

Last year, Reuters reported, Mexico spent just under US $31 billion on various types of imported fuel, including gasoline and diesel.

With reports from Reuters

3 COMMENTS

Have something to say? Paid Subscribers get all access to make & read comments.
Mexico City cityscape view at night with cloudy sky

A cloudy economic forecast? Mexico shows 0% monthly growth in June

1
Earlier this week, the International Monetary Fund slightly lowered its forecast for economic growth in both Mexico and the United States in 2024.
Pedro Casas Alatriste

5 questions about Mexico’s semiconductor industry: An interview with Pedro Casas

0
Pedro Casas of AmCham sees a clear alignment between the U.S. and Mexico that will transform the region's semiconductor supply chain.
Ministerial meeting of the Americas Partnership for Economic Prosperity, with member country representatives seated at banquet tables in a foermal room at the US White House.

New US initiative could ‘turbocharge’ Mexico’s semiconductor industry

0
The Western Hemisphere Semiconductor Initiative aims to turn Mexico and other Latin American nations into semiconductor assembly hubs.