Pemex presses forward with money-losing U.S. refinery purchase

By Amy Stillman and Max de Haldevang on 8/31/2021

MEXICO CITY (Bloomberg) --The Texas oil refinery that Pemex is buying has racked up a rare net loss of about $360 million this year, adding to the challenges Mexico faces in seeking energy independence.

Mexico’s state-owned oil giant agreed in May to buy Royal Dutch Shell Plc’s majority stake in the Deer Park refinery. The facility’s forced shutdown during the Texas freeze in mid-February led it to post the losses through July, according to people with knowledge of the situation. Deer Park has also struggled with market volatility during the pandemic, and its debt has soared past $1 billion in recent months, said the people, who asked not to be named because they weren’t authorized to speak to the media.

Pemex didn’t respond to a request for comment. Shell said it doesn’t disclose the financial performance of individual assets. Pemex chief executive officer, Octavio Romero, said in May that Deer Park, a joint venture between Pemex and Shell, had traditionally posted profits, although it incurred a loss due to the pandemic last year. As of May it had $980 million in debt, he said.

Deer Park’s net loss this year -- more than half the $596 million that Pemex agreed to pay for Shell’s stake in the refinery -- shows how the government’s strategy to shed Mexico’s dependence on foreign energy may put even more pressure on Pemex’s finances. Its debt now tops $115 billion, more than any other oil company, following a decade and a half of oil production declines. The producer agreed to purchase Shell’s 50.1% stake in May using federal funds as part of a government strategy to shed Mexico’s dependence on foreign energy markets.

A worker walks down a set of stairs on the Laurus oil drilling rig operated by Petroleos Mexicans (Pemex) in the Ku-Maloob-Zaap oilfield at Campeche Bay off the coast of Ciudad del Carmen, Mexico, on Friday, Aug. 1, 2014.

President Andres Manuel Lopez Obrador swept into power in late 2018 promising to revive Pemex as an oil producing powerhouse and restore Mexico’s fuel production. That policy has involved constructing an $8.9 billion refinery known as Dos Bocas in the president’s home state of Tabasco, increasing output at Pemex’s existing six refineries, and the Deer Park purchase.

Mexico Energy Minister Rocio Nahle has spearheaded the Dos Bocas project and has lauded Pemex’s purchase of Deer Park as promoting the country’s energy independence goals. In a recent interview with Bloomberg, Nahle said that the Deer Park refinery was profitable. “No, it’s not losing” money, she said from the ministry office in Villahermosa, Tabasco. “Pemex did an internal and external business analysis with an external company and the results they presented are very good.”

In June, U.S. Representative, Brian Babin, a Republican from Texas, published a letter to the Committee on Foreign Investment in the United States opposing the deal because he claimed that Pemex does not have the executive, managerial, or technical expertise to operate the Deer Park refinery safely.

Pemex is under increased international scrutiny after two offshore platform fires in as many months.

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