Losing wagonloads of refined money

Yesterday the Reforma newspaper published a note about the million-dollar losses of Pemex Industrial Transformation (PTRI). He points out how the policies of this administration have led PTRI to lose exorbitant amounts of money even as US refining companies have been reporting record profits. Unfortunately the consequences of this government’s obsession with “energy sovereignty” for Pemex, and in particular for PTRI, are much more serious than this year’s losses.

Previous governments, with the terribly neoliberal idea of ​​reducing losses, decided to lower the processing volumes of the National Refining System (SNR) and limit the reconfiguration investments of the refineries due to their low returns. This led us to depend on US refineries, which are the most efficient and productive in the world. But this government, guided by ideology, reversed this strategy, which has us in the middle of a vicious circle of stratospheric losses.

It all starts with the instruction to increase the levels of use of the SNR. This, due to the lack of historical investment, leads it to produce more fuel oil in the refineries that were not reconfigured (Salina Cruz and Tula). This increase is detrimental to the yields of high-value products —such as gasoline, diesel or jet fuel— and to the refining margins of the system.

At the same time, the MARPOL Convention that entered into force in January 2020 prohibits the use of high-sulfur fuel oil on the high seas, so ships can no longer buy it. Pemex sells part of this excess subsidized fuel oil to the CFE thermoelectric plants, but it is not enough to sell it all. Therefore, it has to sell it as cargo to US refineries, for which it needs to be mixed with light crude. This, together with the indication to export less heavy crude oil, leads the SNR to operate with more heavy crude oil, once again increasing fuel oil production, affecting refining margins.

This self-reinforcing cycle has led to gigantic losses. According to Pemex’s audited income statements, PTRI lost 232,000 million pesos in 2020; 219,000 million in 2021; and, in the first nine months in 2022, 61,000 million pesos. In 33 months, a total of 512,000 million pesos —approximately 25,000 million dollars. To this we must add the long-term health costs due to the damage caused by the burning of fuel oil in the Tula thermoelectric plant that contaminates the entire Valley of Mexico, which we will pay for decades.

If one seriously wanted to move towards a model of energy autarky in search of an ideology of energy sovereignty, it would be necessary to start prioritizing natural gas, which today is the main source of energy in Mexico. The immediate solution is to change the mixture that we inject into the SNR to improve yields. But that would require exporting more heavy crude and importing light crude and lowering the volume processed, all anathemas to this administration. And, if in the medium term we wanted to be self-sufficient in gasoline, invest billions of dollars, with doubtful profitability, in reconfiguring the refineries.

It is unlikely that anyone in the government understands this. Undoubtedly in SHCP and in Pemex there are experts who understand this dynamic, but it seems that nobody dares to explain it to the president. Hopefully the favorite cap wants to understand this because everything seems to be that he is one more problem that he is going to inherit.