Mexico Set to Import More Fuel as Mega Refinery Startup Is Delayed

Mexico is scouring the U.S. and Asian fuel markets for more imports of gasoline and diesel in 2024 and 2025 as the country’s newest refinery is struggling to start up, several traders have told Reuters.

The Olmeca refinery, also known as Dos Bocas, is a flagship project of outgoing Mexican President Andrés Manuel López Obrador, who sought to reduce Mexico’s dependence on fuel imports from the United States.

The 340,000 barrels per day (bpd) refinery, however, has seen multiple delays and budget overruns and is now estimated to have needed double the initial budgeted investment. Initially budgeted at $8 billion, the refinery went into significant cost overruns, with the price tag to date standing at some $18 billion and the start date still unclear.

Dos Bocas is unlikely to be ready to produce commercial quantities of fuels by the end of this year, five sources familiar with the operations told Reuters last month.

Olmeca is set to boost Mexico’s current refining capacity by about 20%, but this will not happen in López Obrador’s term in office, according to Reuters’ sources. López Obrador’s successor, President-elect Claudia Sheinbaum, will take office on October 1 and will see the refinery begin commercial production of fuels.

In view of the delayed start-up of the refinery, traders at state-held Pemex are asking around for higher volumes of fuel to import in 2024 and 2025, compared to earlier plans. Pemex traders are now seeking similar volumes to those they previously imported, a trader at a large commodity house told Reuters.

Despite being one of the largest producers of oil, Mexico will remain a net importer of refined products to meet its domestic demand through 2030, the International Energy Agency said in its annual Oil 2024 report with analysis and forecasts to 2030.

Referring to the Dos Bocas refinery, the IEA said “Reports of its imminent commissioning have waxed and waned as the project continues to face start-up issues.”

The agency expects the refinery to come online “no earlier than the fourth quarter of 2025, with the full ramp-up taking several years.”

Even with higher refinery operations this decade, Mexico will still need around 300,000 bpd of imported fuels in 2030 to meet demand, compared to more than 700,000 bpd in 2023, the IEA says.

By Charles Kennedy for Oilprice.com

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