Full testing of Minatitlán reconfiguration to begin by year-end

Friday, January 23, 2009

Mexican state oil company Pemex's refining subsidiary Pemex Refinación aims to begin tests on its Minatitlán refinery by year-end following reconfiguration works, Pemex CEO Jesús Reyes Heroles told foreign correspondents.

The reconfiguration entails construction of nine processing plants, integration works and auxiliary services to produce higher-value fuels.

Work for some of the six packages tendered for the refinery's reconfiguration has wrapped up, while the remainder is at least 82-83% complete, Reyes Heroles said.

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Tests will begin on some new processing plants at the refinery in mid-2009. "We hope by the end of this year all the plants will be in the testing phase. That's the objective," Reyes said.

Pemex Refinación aims to invest US$537mn in the project in 2009, he added. The project has run over its original budget and schedule.

The reconfiguration will reduce supply bottlenecks for the costlier fuels and in so doing greatly improve Pemex Refinación's financial results.

"The most important thing about Minatitlán's reconfiguration is not its additional contribution to gasoline production but rather that it will radically change the composition [of output]. It will not only provide gasolines, but also diesel and other high-value products. The financial impact is very important," Reyes said.

Minatitlán has the lowest refining margin in Pemex's national refining system (SNR) at roughly US$2/b. By comparison, the Cadereyta and Madero refineries have refining margins of some US$12/b, Reyes Heroles said.

When reconfiguration of Minatitlán is complete, it will boast a margin of US$6-12/b, Guillermo Ruiz, Pemex deputy director of strategic planning and operations, told reporters.

The Deer Park refinery in Texas, a joint venture between Pemex and Anglo-Dutch oil major Shell (NYSE: RDS), has a refining margin of US$12-13/b. The margin is the best of all Gulf of Mexico refineries and serves as a benchmark for Pemex, Ruiz said.

Once the reconfiguration of Minatitlán is fully complete and operations stabilize during 2010, the refinery will produce an additional 40,000b/d of gasoline, Ruiz said.

Reconfiguration of the company's Salamanca refinery also will receive US$279mn investment in 2009 and roughly US$2.21bn through 2012, Reyes Heroles said.

The project entails increasing heavy crude processing capacity and producing high-value products with the construction of eight new plants.