The federal government will recover its almost US $600 million investment to buy Shell Oil Company’s 50.1% share in the Deer Park oil refinery near Houston, Texas, in two to three years, President López Obrador said Wednesday.
“The specific financial analysis for this is already done. [Purchasing the refinery] is good business for the country,” he told reporters at his regular news conference.
López Obrador announced Monday that Pemex had reached a deal to buy Shell’s share in the refinery, which has been a joint venture since 1993.
The sale, worth some $596 million, will help Mexico achieve self-sufficiency in fuel by 2023, according to the president.
Pemex CEO Octavio Romero said Wednesday that up to $490 million of the transaction cost will go toward paying down the joint venture’s debt. Approximately $106 million will go toward servicing a loan received in January by Shell Oil Company, the United States-based subsidiary of Royal Dutch Shell.
López Obrador said Monday that the government will complete the purchase with savings generated by the government’s austerity drive and elimination of corruption. He stressed that the government is not taking on any debt to purchase the controlling stake in the U.S. refinery.
Romero said the British bank Barclays helped to structure the deal. Negotiations with Shell started last August, he said.
The $596-million price tag doesn’t include the value of oil inventories, which was estimated at $250 million to $350 million in a report prepared by the investment firm Tudor, Pickering, Holt & Co.
Romero said that the Deer Park refinery — which has the capacity to process 340,000 barrels of crude per day but only operated at 78.5% capacity last year — reported a loss in 2020 but noted that the profits of most U.S. refineries were affected by the coronavirus-induced decline in demand for fuel.
The Pemex CEO said the purchase of Shell’s 50% stake is an important step toward energy self-sufficiency. The government is also modernizing the six existing Pemex refineries and building a new one on the Tabasco coast at a cost of $8.9 billion.
López Orador, a staunch energy nationalist who has sought to strengthen state control of the sector, said that Pemex needed to find a way to process an additional 200,000 barrels per day in order to achieve self-sufficiency.
“Our options were restarting a refining train at Cangrejera [a petrochemical complex in Veracruz] to process 100,0000 barrels [per day] or buying Deer Park,” he said.
“… In the future we’re not going to sell crude oil and buy gasoline, we’re going to produce in Mexico. Pemex will have the capacity to produce the fuels needed in the country.”
Source: Reuters (en)