On the evening of June 12, 2017, Tropical Storm Calvin made landfall on Mexico’s southern Pacific coast, causing widespread damage and leading to flooding and leaks from storage tanks at the Salina Cruz refinery near the coast in Oaxaca state.
A fire then broke out at the refinery complex, which is owned and operated by state-owned Petróleos Mexicanos (Pemex). The facility was shut down and the fire was fully extinguished in the early hours of June 16, with the death of one company firefighter, according to Pemex.
The 330,000 barrels per day (bpd) twin CDU facility, formally called Antonio Dovalí Jaime, is the largest in Mexico. Pemex estimates that it will restart on July 30.
As a result of the enforced shutdown, Pemex will initially seek to import an additional 70,000 bpd of gasoline in July, increasing its total official import quota for the month to 572,590 bpd, the second highest total ever after December 2016, when protests outside refineries and storage depots forced the state oil company to import 577,000 bpd of gasoline.
Salina Cruz typically supplies less than 10 percent of the country’s auto fuel needs, or some 83,000 bpd of gasoline on average, mainly serving the south and southwest of the country via pipelines, coastal tankers, and trucks.
Mexico’s ageing and underfunded downstream sector cannot meet growing domestic demand and as result the country had to import about half of its refined product needs last year, including an average 503,400 bpd of gasoline, or about 15 million barrels (bbls) per month, according to Pemex data.
The bulk of Mexico’s gasoline imports come from the United States, ranging from 80 percent of the total in January, to 54 percent in March, according to U.S. Energy Information Administration data (EIA).
As a result of the Salina Cruz shutdown, Genscape estimates Mexico will need to import 16.5 million waterborne bbls in July, a 2.5 million bbl increase from June.
Most of the refined products waterborne export traffic from the United States to Mexico is between U.S. Gulf Coast (USGC) refineries and Mexican east coast ports such as Tuxpan and Pajaritos. Products imports can also enter Mexico via its Pacific ports, notably Salina Cruz, which is some 10 kilometers from the stricken refinery, and Manzanillo, both of which are more easily supplied by Canadian and U.S. West coast refineries, or even from Asia.
Indeed, Genscape tracking shows the clean products tanker Overseas Atalmar departed Vancouver on June 25 carrying 39,000 tonnes gasoline, and was due to berth in Manzanillo on July 5, so she was likely fixed after the refinery fire.
Furthermore, two tankers were recently fixed from Singapore to Mexico’s west coast: Ardmore Explorer, to load 35,000 tonnes gasoline on July 7, and Ambassador Norris to load the same volume on July 20. Both tankers were chartered by Pemex’s trading arm PMI Comercio Internacional.
The accompanying graph also shows that some motor gasoline cargoes loaded in Northwest Europe destined for Mexico in June after very little export activity in May.
Genscape cargo tracking shows an increase from 3.3 million to four million bbls in U.S. refined product cargoes destined for Mexico during the week ending June 30, compared to the previous week, though not yet as high as the five million bbls the week before.
If Pemex needs to import yet more gasoline in the short-term, for example because the Salina Cruz refinery does not restart as scheduled on July 30, or does not restart smoothly, additional barrels could also be supplied by independent traders or from storage facilities the Caribbean.
In addition, Venezuela’s ongoing political and oil sector problems have seen state-owned oil company Petróleos de Venezuela Sociedad Anónima (PDVSA) tender for more gasoline, diesel, and associated products from this month through to the end of the year, offering a further boost to USGC exporters, although these include PDVSA’s Citgo affiliate.
Indeed, United States-based refined products exporters may already be benefiting from Latin America’s woes: June 28 EIA weekly data showed a U.S.-wide gasoline stock drawdown of 894,000 bbls, much more than the expected 583,000 bbl decline, although still higher than the historical average for the time of year.
Mexico’s short-term products shortage, combined with Venezuela’s ongoing crisis, will likely result in additional imports of gasoline to both countries from the United States. Given that most U.S. refiners are already operating at or near full capacity, U.S. gasoline stock levels will likely drop further in the coming weeks, unless much of the incremental supply to Mexico comes from Europe or Asia.
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