Pemex seeks new alliances in Asia

Mexico’s state-owned Petróleos Mexicanos (Pemex) is looking toward Asia to reduce its dependency on the United States as its number-one crude customer. Pemex officials recently signed a series of agreements with several Chinese firms to begin marketing its oil in China.

Emilio Lozoya, Pemex director general, has agreed to sell the Chinese state-owned Unipec some 30,000 barrels a day over the next two years. Under the terms, the Mexican petroleum giant – which is the seventh largest in the world – will receive $3 million daily.

It will be the first time Pemex has exported oil on a regular basis to the Asian continent. In the past, it supplied crude to some countries in the Far East but in limited quantities.

The agreements are part of President Enrique Peña Nieto’s strategy to forge new trade opportunities with China. The Chinese send billions of dollars of products to Latin America but Latin American exports to China and other Asian countries are far fewer on the ground. Among the Chinese exports that have flooded the Latin American markets are iron and steel products, electronics and automotive parts. Peña Nieto, along with some of his Cabinet members, recently conducted a six-day tour of China and Japan.

“Mexico is going to be much more aggressive in its trade with China, especially when it joins the Trans-PacificPartnership Agreement (TPP), which will occur shortly,” said economist Samuel García.

Peña Nieto’s proposal to open Mexico’s oil industry – nationalized by Lázaro Cárdenas in 1938 – to foreign investment will be one of the most important steps taken by the Institutional Revolutionary Party (PRI) administration during its six-year term, García said.

It's a big investment and what country other than China can do this?”

“This is going to require a lot of investment and what country other than China is prepared to do this?” he said.

If Mexico succeeds in penetrating Asia’s markets, it will shift its dependency from the United States, which, as it most important customer, currently buys 72.6 percent of the country’s oil exports. The United States has recently announced that it will purchase less oil from abroad because it has more than enough in its reserves. “This challenges Mexico to seek out other markets. It cannot take the risk of depending on just one partner,” García said.

Mexico sells the United States one million barrels a day, while Saudi Arabia is the number-one supplier to US markets with 1.2 million barrels. Venezuela ranks third with 950,000 barrels.

Pemex has also signed research and development agreements with two other Chinese corporations, CNCP and Xingxing.

In Japan, Lozoya held preliminary talks with Mitsui Corp. to work together to build an oil pipeline from the United States to Sinaloa to import some 770 million cubic feet of natural gas from the north, according to Pemex. The gas will be used for Mexico’s petrochemical and automotive assembly plants as well as for manufacturers of steel and fertilizers.

The Japanese are also interested in helping build the Los Ramones pipeline, which will connect Tamaulipas state to Guanajuato. This project is scheduled to get under way next year.