Mexico’s president-elect Andres Manuel Lopez Obrador on Oct. 23 criticized state-run Pemex’s plan to import U.S. light crude from refiner Phillips 66, calling it a sign of the country’s failed economic policies.
Pemex is set to begin crude imports in November, for the first time in over a decade. It needs them to feed Mexico’s main refinery, which is working below capacity due to a lack of light oil.
The purchase of 1.4 million barrels (MMbbl) of U.S. Bakken crude will follow a tender awarded earlier this week to Phillips 66. Up to 100,000 barrels per day (bbl/d) of crude imports are planned for the last quarter of 2018.
“This announcement ... is another example of the great failure of neo-liberal economic policies in the last 30 years,” Lopez Obrador said on Twitter.
Once he takes power in December, Lopez Obrador could force Pemex to halt the imports, which would likely impact domestic refining and boost the need for other kinds of imported fuel.
The issue has divided opinion among his allies.
One of his economic advisers, Abel Hibert, said earlier this month that crude imports could continue as a way to increase processing levels at Mexico's refineries, even after Lopez Obrador takes office.
“I think Pemex has good reason to do it due to current market conditions,” he told local media.
Mexico’s light crude output has declined faster than expected this year, hit by operational problems at the Xanab oil field.
Pemex CEO Carlos Trevino has said the company’s goal of producing 1.95 MMbbl/d of crude this year will not be met, and that the 2019 target is also likely to be missed.
If Pemex does not start crude imports for its refining network, purchases of finished fuel, especially gasoline, would grow again to satisfy Mexico's consumption of about 1.5 MMbbl/d, analysts have said.
Lopez Obrador’s main plan for the oil industry involves building a new mid-size refinery to boost fuel production while reducing crude exports with the final goal of halting them.
He has criticized his predecessor’s opening of the oil and gas industry to foreign investment, but has not given details of how he would reverse the country’s dwindling crude production.
Rating agencies Moody’s and Fitch earlier this month said cutting oil exports would imply a significant cash flow sacrifice for Pemex, whose main source of revenue is crude exports. Fitch changed Pemex’s outlook to negative from stable.
With high inventories and limited export possibilities, NGL prices drop and margins are squeezed.
Gas provider is under pressure to recoup losses.
Democratic Senator Tammy Duckworth on Wednesday asked the U.S. Environmental Protection Agency's Office of Inspector General to investigate why the agency vastly expanded its use of waivers to exempt small refineries from the nation's biofuel law.