Mexico
Q&A

Decision to refit Camargo petchem plant questionable

Bnamericas Published: Monday, December 01, 2014

The decision by Pemex's petrochemicals division PGPB to invest US$36mn in upgrading the Camargo plant in Chihuahua is questionable, given the plant's outdated technology and the impossibility of competing with the new plant planned for Topolobampo, Pablo Ramírez, a retired Pemex executive and director of energy consultancy Petroexpertos 5000, told BNamericas.

BNamericas: Do you think the plan to refit the Camargo refinery in Chihuahua is a good one?

Ramírez: The Camargo refit doesn't make much sense. It has outdated 1960s technology and consumes a lot of gas oil. Therefore, it's expensive to operate, and only has a capacity of 140,000t/y. It's not competitive compared to the planned natural gas-fired plant in Topolobampo, Sinaloa state, which will be built by the private sector, and which would run on natural gas imported from Arizona. That plant would be at least three times larger and much more efficient than the Camargo plant. I think there are a lot of questions surrounding the logic behind the decision to refit it. It's not the best option.

BNamericas: Was the cancelation of the Bicentenario refinery project a good idea?

Ramírez: For Pemex, it was the best option. It was to be a 150,000b/d capacity plant at a cost of US$12bn, which was way too expensive. BP sold the Texas City refinery in 2013 for US$1.2bn, and which has a 470,000b/d capacity. So, with the US$12bn that Pemex was planning on spending on the Bicentenario, it could have bought five refineries. The problem Pemex will have now, with its lack of refinery capacity, is that it won't be able to convert residuals before the market opens up to competition. The best option would be to process lighter crude, even if it has to be imported.

BNamericas: Do you see the Braskem-Idesa Etileno XXI project as the start of the reactivation of the country's petrochemical sector?

Ramírez: There could be more projects in northern Mexico and there are several options – by importing ethanol via pipeline, for example. In the US, there is plenty of supply and if they build another eight or 10 ethanol plants, there would be a surplus that Mexico could import, as Canada does for its ethylene production.

BNamericas: What is your opinion of the energy reform in general?

Ramírez: It's good, and it makes Mexico attractive for investors. And I think it goes further than the reforms in Brazil, where foreign investment was not as high as expected. The difference with Brazil is that much of the oil is in deep water, whereas Mexico still has a lot of shallow water reserves. There's still plenty to do. I think the private sector will be given the shale reserves, which are complex and expensive but also have a shorter life.

BNamericas: Do you think Pemex will be sidelined as a result of the reforms and private firms entering Mexico?

Ramírez: I think Pemex – given that it's being granted the most cost-efficient fields and it won't have to invest as much – will be able to better use its funds. But it also needs to improve internally to better manage its assets and operations.

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