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Texas Standard

Mexico’s Pemex Eyes Takeover Of Deer Park Refinery

deer_park_refinery.jpg
Roy Luck/Flickr (CC BY 2.0)
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The Deer Park refinery, as seen from the Houston Ship Channel.

From Texas Standard:

Last month, Petróleos Mexicanos, commonly known as Pemex, surprised the energy industry with an announcement that it would be taking full control of the Deer Park refinery outside of Houston. Since 1993, the refinery has been operated as a 50/50 joint venture between Pemex and Shell Oil Co. But on May 24, Shell announced it would be selling its stake and the refinery after an “unsolicited offer” from the Mexican state-owned company.

But some industry insiders say the move may be more for political gain by the Andrés Manuel López Obrador administration, and could ultimately be a risky one for Pemex.

“The appeal is for the president of Mexico who discerns an intrinsic value in having a greater control by Pemex of refinery capacity,” said Houston-based energy industry analyst George Baker. “His idea is that the country is best served if Pemex, as the state petroleum agency, has complete national self-sufficiency and refinery capacity.”

Baker says that losing Shell as a partner at the refinery would be a setback for Pemex. In buying out Shell’s stake, Pemex would be losing the Dutch corporation’s expertise and brand recognition. The announcement also dealt a blow to the refinery’s credit rating.

“Shell provides a flow of innovation into the park from its global operations,” Baker said. “Pemex has only Mexican operations that don’t have global inputs from a major refiner. So having Shell provide innovation, provide technical expertise as a big asset for Pemex, and to walk away from that, is going to be a loss for the company.”

There are also safety and environmental concerns with the takeover. Baker says Pemex’s safety record is spottier than Shell’s, and its refineries tend to be less efficient.

“Pemex has a long history of accidents in its refining division. The statistic that most concerns me, and should concern everyone in the Houston area, is that Pemex’s refineries operate at a 40% efficiency on average, whereas the Deer Park refinery operates on an 80% efficiency,” Baker said. “So you’d have to ask yourself, under Pemex’s control, ‘Are they ready to operate a refinery and double the efficiency rate that they do at home?’”

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