Mexico's Pemex Refinery Impact
Sept. 15, 2023
According to Mexico’s Energy Minister Rocio Nahle, the nation’s Dos Bocas refinery operated by state company Pemex is expected to run at its full capacity by the end of this year. The refinery, with a capacity of 340,000 b/d, is projected to mainly consume local heavy crude. The tightening crude balances in Mexico could result in less available exports to the US Gulf, where the heavy Maya grades have been very attractive post OPEC+ production cuts. With approximately 70% of the Mexico>US Gulf volume being carried by Aframaxes, the surged growth in Aframax Caribbean>US Gulf ton-mile demand captured in 2023 is unlikely to continue as we move into 2024 (Figure 1). However, this demand is expected to substantially grow again by 40% in 2025, mainly due to the expected return of Venezuela>US Gulf volume in a sanction-easing scenario.
The new Pemex refinery could also impact the VLCC demand. The reduction in heavy crude imports from Mexico could find US refineries to use more domestic grades, especially when less Canadian crude will be available in the USG post the completion of the TMX project and OPEC+ production cut carries into 2024. As a result, US crude exports could be capped to both Europe and Asian countries – trades that have been dominated by the VLCC segment in 2023. According to our recently published 2023 Mid-Year Update, we foresee the VLCC demand out of the US Gulf to slightly decline by 0.11% in 2024 and 0.49% in 2025, after a significant growth in 2023 of 10.6% (Figure 2).
Figure 1: Aframax Ton-Mile Demand Figure 2: VLCC Ton-Mile Demand
Source: McQuilling Services, IEA, HIS Markit, UN Comtrade
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