Refining unit to post operating profits in 2012 - Pemex CEO

Tuesday, July 26, 2011

Mexico's state oil company Pemex aims for its refining subsidiary to finally post operating profits in 2012, CEO Juan José Suárez Coppel said Tuesday.

Pemex Refinación last year posted an 160bn-peso (US$13.8bn) operating loss and an 87bn-peso net loss, the latter of which was 38.4bn pesos greater than in 2009, according to Pemex's year-end report.

Pemex's six refineries have capacity to process 1.54Mb/d of crude, but processed just 1.18Mb/d in 2010 due to inefficiency and unplanned downtime. This exacerbates gasoline imports, which constituted half of domestic consumption in 1H11, up from 43.9% year-on-year, according to statistics from energy ministry Sener.

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Suárez, who spoke at the inauguration of the revamped Minatitlán refinery, said Pemex is implementing a new way of operating at its Madero and Salina Cruz refineries. The program emphasizes maintenance, stopping unplanned downtime, punctual conclusion of maintenance works, as well as flexibility in operations to better attend to demand and maximize margins.

Once fully implemented, the two refineries will yield more than US$300mn additional revenue to Pemex annually and "extension to the other refineries will guarantee that the company maintains profitability," according to Suárez.

"We are immersed in a rigorous program of improving the operational performance that is beginning to bear fruit. This program seeks to considerably increase operational discipline in order to give way to a new productive culture, which permits reduction of operating costs, improving gains, and guaranteeing continuous optimization of production," the executive said.

Pemex's acquisitions, leases, works and services committee authorized a program last December to improve operational performance, increase reliability and revert refining losses. The program intends to increase the variable refining margin to US$2-2.5/b by mid-2013. By comparison, the company's variable refining margin was a negative US$0.20/b in 2010 "primarily due to operational problems," Pemex said at the time.

Investment in maintenance for Pemex Refinación will surpass 10bn pesos in 2011, energy minister José Antonio Meade said at the event.

Refining investment in 2011 is set to reach 32.6bn pesos, just 11.4% of total planned investment, but up from 22.6bn pesos last year. By contrast, E&P makes up 85% of Pemex's 2011 budget.

Pemex has announced plans to build a new 250,000b/d refinery in Tula, Hidalgo state that would be its first new facility in more than 30 years. It is scheduled to begin operations in the beginning of 2016, while a simultaneous reconfiguration of the Salamanca refinery is expected to be completed in 2014.