Mexico will announce the winners in the second round of offshore auctions three months later than expected
Mexico will delay the announcement of winners for Round 2 of its oil and gas auction in order to allow more companies to take part, and to incorporate modifications suggested by the industry. The delay will push the timeline back on announcing the winners roughly three months, according to a report from Reuters.
“The adjustments meet Mexico’s interest to guarantee greater involvement of companies in this auction,” the Finance Ministry said in a statement. “The adjustments also include the recommendations of industry aimed at increasing competition and investment.”
Mexico had originally planned to announce the winners of Round 2 on March 22, 2017. The Mexican government now plans to announce the winners of the tender, which includes 15 shallow-water Gulf of Mexico blocks, on June 19, 2016.
Fuel shortages growing as demand outpaces Mexico’s refining capacity
Mexico’s government has undertaken a plan to liberalize its oil and gas sector after a 77-year monopoly by state-run Pemex in order to make the industry more competitive. Thus far, the program has included several successful tenders, both on and offshore, but the country’s oil and gas sector is still struggling to keep up with demand.
Pipeline theft, pricing and maintenance issues, and speculation ahead of a shift away from heavily-subsidized gasoline prices in January have contributed to fuel shortages in parts of Mexico. Gasoline shortages were being reported in at least 12 Mexican states, including San Luis Potosí, Guanajuato, Aguascalientes, Chiapas, Nuevo Leon, and Oaxaca. In San Luis Potosí there were reports of lines with more than a 100 cars and tens of people on foot with tanks and containers, reports Business Insider.
The problem has been compounded by the fact that Mexico’s domestic refining capacity has not been able to keep pace with broader growth. The economy has expanded for 27 straight quarters in Mexico, quickly outpacing growth in the refining sector.
Mexico’s fuel demand is about 2.0 MMBOPD and is expected to grow 2% to 3% in the years ahead, according to Reuters. Moreover, car sales in Mexico through September of this year were up 18%, hitting a record of 1.1 million units.
Supplies to meet Mexico’s unmet demand coming from the U.S.
Increasing demand in Mexico has proved to be a boon for U.S. oil refiners. Mexican imports of U.S. fuel grew to about 960 MBOPD — a monthly record and well ahead of the year-to-date average of 820 MBOPD. In 2016, Mexico, a major crude-oil exporter, will be a net oil importer from the U.S. for the first time.
“Mexico’s appetite for U.S. gasoline and distillates has played a significant part in sustaining Gulf Coast refining margins,” Sandy Fielden, director of oil and products research at Morningstar, said. The U.S. refining industry as a whole saw profits at a five-year low in 2016.
At present, Pemex refineries are running at about 60% of their 1.6 MMBOPD capacity. Mexico’s total energy consumption in 2015 consisted mostly of petroleum (46%), followed by natural gas (40%), according to the EIA.
