Mexico to stop sending oil out of country in 2023
Mexico plans to halt crude oil exports in 2023 as part of President Andres Manuel Lopez Obrador’s nationalist goal of self-sufficiency in fuel production.
Petroleos Mexicanos, the Mexican state-owned producer known as Pemex, will reduce daily crude exports next year by more than half to 435,000 barrels before phasing out sales to foreign customers the following year, Chief Executive Officer Octavio Romero said during a press conference in Mexico City on Tuesday.
The ambitious — and some say improbable — endeavor is part of Lopez Obrador’s drive to expand homegrown production of gasoline and diesel that Mexico now mostly buys from U.S. refiners. Like many major oil-producing nations, Mexico lacks the processing capacity to convert its oil bounty into fuels and other end-products.
If fulfilled, Pemex’s pledge will mark the exit from international oil markets of one of its most prominent players of the past decades.
Skeptical reception
Despite the pledge, questions abound over whether the heavily indebted state driller can achieve its goal and many question the logic of scrapping crude exports that are a significant source of cash for Mexico and Pemex bondholders. The company is shouldering a $113 billion debt load that is larger than that of any other oil explorer in the world.
The skepticism about Pemex’s ability to refine all of its own crude output stems from the company’s poor operating and safety record. Pemex refineries have been operating at a fraction of capacity for half a decade after years of underinvestment and lack of maintenance.
In contrast, U.S. refiners typically operate at more than 90% of capacity; even during the worst of the pandemic-driven collapse in energy demand, American fuel makers were churning away at close to 70%.
Production slump
Last month, Pemex sold slightly more than one million barrels abroad on a daily basis. It’s been struggling to raise so-called runs at its refineries. Meanwhile, its crude output has declined every year since 2004, with the exception of last year due to a rise in production of condensate, a very light oil that’s usually of lower value than regular crude.
To meet its energy goals, Pemex aims to refine 1.51 million barrels of crude a day next year and 2 million in 2023, Romero said. The Mexican driller will plow all of its production into a fleet of refineries.