by Lucia Kassai – (Bloomberg) — US oil refiners along the Gulf Coast are snubbing shipments from Mexico and instead turning to Colombia and Canada amid complaints that Petroleos Mexicanos is increasingly delivering crude that’s unfit to make gasoline and diesel.
Refiners in Texas and Louisiana are demanding discounts and repeatedly complaining about the high water content in crude currently coming from Mexico, according to people with knowledge of the situation who asked not to be named citing private discussions. That’s upending flows of crude that the processors have relied on for the past half century.
US fuel makers are in a state of alarm as Mexico is the largest supplier of crude to the country after Canada. The situation comes as Mexico’s state oil company, known as Pemex, struggles to make good on payments of $20 billion owed to suppliers of chemicals and equipments used to make its oil fit for refinery consumption.
Pemex didn’t immediately provide comment.
Flagship Maya crude is being delivered with as much as 6% of water content, or six times more than the industry standard, the people said. That means when a refiner buys a standard cargo of half a million barrels, around 30,000 barrels are water, or the equivalent to almost $2 million, according to Bloomberg calculations.
Poor-quality crude supplies are adding to a slew of concerns for US oil refiners as they also contend with the impact from tariffs and plunging flows from Mexico that last month slumped to a 35-year low. Gulf Coast US refiners are scouring for alternative sources and tapping shipments from Canada and Colombia instead, sending prices higher. Too much water slows down refining because fuelmakers need to pre-treat it and make extra arrangements to dispose of the water that wasn’t supposed to be in the oil.
Quality issues are also affecting Pemex’s own refineries in Mexico.
The country’s largest refinery, Dos Bocas, was shut down in mid-December and remains offline as it awaits refinery-ready crude to restart, according to a person with knowledge of the matter who asked not to be named because the information is private.
The current supply is so salty that it could damage the refinery that was inaugurated less than three years ago, eliciting a rare admission of problems by President Claudia Sheinbaum. She indicated that “bad weather” was at the core of the problems with quality and that Pemex was working to solve the issue as “there are different chemicals that help with this,” she said last week.
