Mexico City: Mexico, a major oil exporter but an importer of refined fuel, is mulling buying petrol from India if prices there undercut costly US refineries, state oil monopoly Petroleos Mexicanos (Pemex) said on Tuesday.
Pemex will examine market conditions in the second half of the year, when India is expected to complete a new oil refinery that could take in Mexican crude and ship back refined fuel. “It’s being evaluated and it will depend on price levels,” said Pemex spokesman Carlos Ramirez.
Dogged by a lack of capacity at its six refineries, Mexico has been a net fuel importer for several years, and currently buys a hefty 40% of its fuel from US refineries.
Pemex currently exports an average of 35,000 barrels per day (bpd) of crude across the Pacific Ocean to India.
Its trading arm believes shipping back Indian petrol could prove cheaper than piping or trucking in fuel from the US, which buys 80% of Mexico’s exported oil.
Mexico recently stopped shipping oil to West coast refineries in the US—a decision based on port infrastructure and costs. Pemex said at the time that it would ship crude to other markets, where there were better economic alternatives.
Even if India proves a cheaper option, the process of exporting oil to overseas refineries, only to buy back expensive refined fuel hurts Mexican industry and the government, which subsidizes petrol for motorists.
Mexican officials have repeatedly said a new refinery is needed, but there is no concrete plan yet to build one.
Pemex has spent the past 10 years upgrading its six refineries to improve output capacity. Work at the Tula, Madero, Salamanca and Cadereyta plants is complete, and Pemex is working on its Minatitlan and Salina Cruz refineries.
The world’s No. 5 crude oil producer by volume and a major US supplier, Mexico produces around 450,000 bpd of petrol but consumes 750,000 bpd, and the latter figure is growing.
Ruling party senator Ruben Camarillo said last month that Mexico could save billions of dollars a year if it could refine all its fuel. Camarillo and other senators are debating a new energy law, which could permit monopoly Pemex to form partnerships on Mexican soil in areas such as oil refining.
Pemex has a 50% share in Shell Oil’s Deer Park refinery in Texas, but many lawmakers would like to see a refinery joint venture on Mexican soil. Shell Oil is the US unit of Royal Dutch Shell Plc.