Mexico's Push to Become Self-Sufficient in Oil & Gas Production Seems Doomed

[Tom Kirkman + 8,860]

Please allow me to highlight (in bold) a few bits from excerpts from this Bloomberg article below.

Perhaps then you will better understand why I worded this thread title in this specific way.

A quick checklist of Failure Mode line items:

● Government project rather than professionals - yep.

● Unrealistic budget and timeline - yep.

● Pemex almost bankrupt already - yep.

● Existing oil refineries barely functioning - yep.

● Existing oil refineries losing money - yep.

● Existing oil refineries lack of maintenance - yep.

Seems like a recipe for disaster to me.

Perhaps a better idea would be to overhaul and perform major maintenance on existing oil refinery infrastructure rather than the government building a new oil refinery all on its own.

If the government is unable to maintain its existing oil refineries and continues to lose money operating its oil refineries (even when oil prices are pretty darn good this year) then diverting government money away from much needed major maintentance on existing oil refineries to build a new oil refinery with insufficient funds and too short of a project timeline by government officials seems a bangup way to have a massive failure. 

A government building a new oil refinery in 3 years with too little money and too little time? Really?

Mexico to Kick Off Refinery Project as AMLO Rallies Nation

Mexico is kicking off the construction of its 150 billion peso ($7.7 billion) oil refinery amid a call by President Andres Manuel Lopez Obrador for the country to become self-sufficient in energy production.

The nation “depends too much on buying foreign gasoline,” the president, commonly known as AMLO, said at an event Sunday in Paraiso, Tabasco, where the seventh refinery will be built. The bidding process for the six phases of the refinery begins at the end of June.

The leader also used the platform to rally the country after U.S. President Donald Trump threatened in the past week to slap a 5% tariff on all goods from Mexico if it doesn’t curb an unprecedented surge in migrants over the U.S. border. The Mexican peso slumped and was the worst performer among major global currencies in the past week.

 

... AMLO reiterated that the refinery will be inaugurated in three years, adding that it will be built by the government rather than a third party.

Last month, the Mexican leader handed the project to Petroleos Mexicanos after he canceled a tender when the bidders failed to meet his ambitious three-year timeline and stay within the $8 billion budget allocated for it.

While the Dos Bocas refinery has 50 billion pesos in initial resources allocated for the year, the project may be problematic for Pemex, the world’s most indebted oil major. The state-owned oil company’s six refineries are currently processing at about 35% of their capacity.

Pemex’s existing refineries are in such poor shape that they lose more money the more crude they process. The Salina Cruz, Minatitlan and Madero plants all have been offline intermittently in the past several years, which Pemex has said is due to extended maintenance or because of operational problems.

[ceo_energemsier + 1,818]

34 minutes ago, Tom Kirkman said:

Please allow me to highlight (in bold) a few bits from excerpts from this Bloomberg article below.

Perhaps then you will better understand why I worded this thread title in this specific way.

A quick checklist of Failure Mode line items:

● Government project rather than professionals - yep.

● Unrealistic budget and timeline - yep.

● Pemex almost bankrupt already - yep.

● Existing oil refineries barely functioning - yep.

● Existing oil refineries losing money - yep.

● Existing oil refineries lack of maintenance - yep.

Seems like a recipe for disaster to me.

Perhaps a better idea would be to overhaul and perform major maintenance on existing oil refinery infrastructure rather than the government building a new oil refinery all on its own.

If the government is unable to maintain its existing oil refineries and continues to lose money operating its oil refineries (even when oil prices are pretty darn good this year) then diverting government money away from much needed major maintentance on existing oil refineries to build a new oil refinery with insufficient funds and too short of a project timeline by government officials seems a bangup way to have a massive failure. 

A government building a new oil refinery in 3 years with too little money and too little time? Really?

Mexico to Kick Off Refinery Project as AMLO Rallies Nation

Mexico is kicking off the construction of its 150 billion peso ($7.7 billion) oil refinery amid a call by President Andres Manuel Lopez Obrador for the country to become self-sufficient in energy production.

The nation “depends too much on buying foreign gasoline,” the president, commonly known as AMLO, said at an event Sunday in Paraiso, Tabasco, where the seventh refinery will be built. The bidding process for the six phases of the refinery begins at the end of June.

The leader also used the platform to rally the country after U.S. President Donald Trump threatened in the past week to slap a 5% tariff on all goods from Mexico if it doesn’t curb an unprecedented surge in migrants over the U.S. border. The Mexican peso slumped and was the worst performer among major global currencies in the past week.

 

... AMLO reiterated that the refinery will be inaugurated in three years, adding that it will be built by the government rather than a third party.

Last month, the Mexican leader handed the project to Petroleos Mexicanos after he canceled a tender when the bidders failed to meet his ambitious three-year timeline and stay within the $8 billion budget allocated for it.

While the Dos Bocas refinery has 50 billion pesos in initial resources allocated for the year, the project may be problematic for Pemex, the world’s most indebted oil major. The state-owned oil company’s six refineries are currently processing at about 35% of their capacity.

Pemex’s existing refineries are in such poor shape that they lose more money the more crude they process. The Salina Cruz, Minatitlan and Madero plants all have been offline intermittently in the past several years, which Pemex has said is due to extended maintenance or because of operational problems.

If they successfully build that refinery within the time frame and at budget, that will be a feat, instead of throwing money at something that doesnt exist , why dont they put money into their refineries that exist and try to fix those and before that fix the incompetence and corruption.

It already is a failure when potentially competent bidders were ousted because they were being honest about the budget and time line

I remember a situation in which PEMEX (PMI) was importing jet fuel under a contract and then some characters within the organisations were  turning around and exporting that same jet fuel. The gov. lost $$$ on buying side and lost $$$ on the selling side. It was supposed to be used for their domestic jet fuel needs.

[Tom Kirkman + 8,860]

3 minutes ago, ceo_energemsier said:

It already is a failure when potentially competent bidders were ousted because they were being honest about the budget and time line

Nailed it.

[tldpdb1 + 24]

A 16 Billion Dollar Refinery

[DanilKa + 443]

@Tom Kirkman, you are forgetting serious progress adversary - los Sindicatos (trade unions).

May also worth mentioning anti-frac stance of AMLO, although this is of little practical importance as no large shale oil/gas projects were close to development to my knowledge. Cantarell declining production is main factor.

[Tom Kirkman + 8,860]

13 minutes ago, DanilKa said:

@Tom Kirkman, you are forgetting serious progress adversary - los Sindicatos (trade unions).

May also worth mentioning anti-frac stance of AMLO, although this is of little practical importance as no large shale oil/gas projects were close to development to my knowledge. Cantarell declining production is main factor.

Yep, I'm not much of a fan of trade unions.  I've seen the bad effect that unions can have when I lived in New York and New Jersey, where unions are basically mob ruled (I mean literally, ruled by the mob, Cosa Nostra).

Fracking is not really an issue at this point for Mexico.

Government projects tend to go waaaaay over budget and waaaaaaaay exceed the project time frame; government corruption can be some of the most pernicious and corrosive kinds.