The federal government will invest an additional 75 billion pesos (US $3.7 billion) in the state oil company to confront the “severe crisis” of declining oil production, President López Obrador said yesterday.
The government, which took office on December 1, plans to direct the money towards modernizing the six existing Pemex oil refineries and building a new one for US $8 billion in Dos Bocas, Tabasco, where the new president announced the extra investment.
“We’re going to increase the investment by 75 billion pesos and I’m sure that it will be enough because it’s not money that has been lacking, the problem is that there has been too much corruption, examples abound,” López Obrador said.
The additional funding will come from savings stemming from the implementation of government austerity measures, he explained.
Mexico’s first leftist president in a generation said the tendering process to build the new refinery will begin by March at the latest, and defended the location chosen for the project.
“Let me clear it up because there is a lot of misinformation: why did we decide to build the refinery in Dos Bocas? Because it’s the most important [oil] terminal in the country, around 1 million barrels arrive daily at this maritime terminal, everything that’s produced off the coast of Tabasco arrives at this terminal,” López Obrador said.
“[The refinery] is going to be built here because [the oil] is going to be processed here, it’s going to be turned into fuel, it’s the best place, it’s not a political matter, it’s a technical matter . . .” he added.
Pemex is currently producing fewer than 1.8 million barrels of crude per day and is on track for its 14th consecutive yearly decline.
But López Obrador said that by 2024, the last year of his six-year term, production will rise “realistically” to 2.4 million barrels per day.
The new refinery will be built on 566 hectares of federal land and have the capacity to process 340,000 barrels of crude a day, the president said. A pipeline will connect the refinery to the Dos Bocas port.
López Obrador has been highly critical of Mexico’s need to buy fuel from abroad due to declining production and yesterday questioned once again the logic of the situation.
“How do we respond to that absurdity that we are dedicated to selling crude oil and buying gasoline, as if we sold oranges and bought orange juice?” he asked.
“In three years we will be producing the gasoline that we consume in the country, so that we can lower the prices of the fuel,” López Obrador declared.
The president was also critical of the past government’s energy reform, which opened up the sector to foreign and private companies for the first time since former president Lázaro Cárdenas nationalized all petroleum reserves in 1938.
Foreign investment totaled just 2.5% of the amount Pemex has invested over the past four years, he said.
The president hinted that Mexican companies would carry out the modernization of the six existing refineries, stating that “we’re going to place our trust in Mexican entrepreneurialism.”
However, the news agency Bloomberg reported that Ica Fluor, a joint venture between Mexico’s Empresas ICA SAB and Fluor Corp. in the United States, as well as U.S.-based Bechtel, have expressed interest in the tender process to build the new refinery.
Energy Secretary Rocío Nahle said that Mexico will import 80% of its gasoline needs this year because the refineries are only working, on average, at 38% capacity.
“The objective of the new refinery at Dos Bocas . . . is to contribute to energy self-sufficiency, maximize the social and economic benefit [of Mexico’s oil and] boost development in [Mexico’s] southeast . . .” she wrote on Twitter.