Contents

Introduction

Since the beginning of the last decade, the demand for petroleum products has been increasing in the region due to the expansion of the automotive fleet and the growing needs of power plants. This increase has not been accompanied by an increase in the capacity at regional refineries, which, for the most part, have become obsolete due to lack of investment.

In this context, most Latin American countries have started to import more refined fuels. The purchases mostly come from the United States, which increased crude production by 69.3% between 2006 and last year. According to the US Energy Information Administration (EIA), 30 Latin American countries bought 2.32 million barrels per day (b/d) of diesel, gasoline and other fuels in last year from the US, 67% more than in 2011. In the first quarter of this year, the upward trend continued with imports of 2.49 million b/d.

This is especially seen in Mexico, a country that already covers almost 65% of its domestic demand with imports. But Brazil, Chile, Colombia, Panama, Ecuador and even Venezuela are net importers of fuel from the United States.

"These trends will continue to deepen and that is related to the fact that an isolated refinery in Peru, Colombia or Brazil is much more expensive to operate than a refinery inserted into a cluster on the Gulf Coast in the United States given the difference in infrastructure and specialized services," says Ramón Espinasa, a leading specialist in oil and gas of the Energy Division of the Inter-American Development Bank (IDB) in Washington. "On the other hand, vertically integrated oil companies, especially state oil companies that have budgetary restrictions, will continue to prioritize investments in production rather than refining because they are much more profitable."

There are two visions in the industry. On the one hand, there are those who believe that Latin American countries should continue to take advantage of the benefits of importing fuel at low prices before embarking on expensive refinery construction or modernization projects. On the other hand, there are those who believe that the countries of Latin America lose with this strategy. They lack energy security and are more exposed to fluctuations in prices.

While fuel imports from the region fell from US$ 51 billion in 2015 to almost US$ 47 billion last year, with 2012 prices, the 2016 bill would have doubled. These risks are growing. The sulfur content allowed for marine fuels is expected to fall from the current 3.5% to 0.5% by 2020, as defined by the International Maritime Organization at the end of last year. The change in regulation threatens to raise diesel prices in the coming years.

In this report we will describe the current refining capacity in the major hydrocarbon-producing countries of Latin America. In addition, we will identify the projects and works in execution, and the main trends that are projected for this segment in the coming years.

Figure: Falling Throughput

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