Mexico wants to import US oil

Mexico is in talks with the United States as it anticipates making a shift in its energy policy. Petróleos Mexicanos (Pemex) has asked the US Commerce Department to make an exception to its ban on US crude oil exports. In a role reversal, the Latin American country, the US’s third-largest provider after Saudi Arabia and Canada, would receive 100,000 barrels of light crude oil from its northern neighbor. According to US Commerce Secretary Penny Pritzker, authorities are still evaluating the Mexican proposal.

If the proposal is approved, Pemex will import light crude oil for refining at its installations in Salamanca (Guanajuato), Tula (Hidalgo) and Salina Cruz (Oaxaca). The state-owned oil company has said in a statement that it wants to increase its production of gasoline and diesel. Mexico imports 53.8 percent of the gasoline sold on its domestic market, though the government had, until now, held a monopoly. Despite falling oil prices worldwide, the cost of fuel in Mexico is 50 percent higher than in the United States.

According to US Commerce Secretary Penny Pritzker, authorities are still evaluating the Mexican proposal

In exchange for the American contribution, Pemex would provide heavy crude oil for US refineries. “This is not an additional commitment to the 803,000 tons of Mexican oil exported to the United States per day on average last year,” Pemex explained. The company said both countries would reduce transport costs by carrying oil shipments by sea instead of moving refined products by land. The agreement would also allow US companies to take advantage of their extensive supplies, especially in the booming light shale oil industry.

Mexico’s ambassador to the United States, Eduardo Medina Mora, said negotiations had gotten off to a good start and the Commerce Department would announce a decision soon. The diplomat also pointed out that Canada already imports unrefined crude oil from the United States. Pemex, he said, had made this proposal in order to “optimize the market” in North America. “We want to be able to work together,” Secretary Pritzker told Reuters.

Despite falling oil prices worldwide, the cost of fuel in Mexico is 50 percent higher than in the United States

After Mexico passed new energy reforms in December 2013, Pemex began a restructuring process. The oil giant plans to expand its natural gas distribution on the domestic market and to improve exploration and extraction of crude oil in shallow waters – an area in which the company has great expertise.

Meanwhile, production at Pemex has fallen from 3.3 million barrels per day to 2.5 million over the last 10 years. And, in its first nine months of 2014, it registered historic losses of $12 billion. Until then, Pemex sales brought in 30 percent of the government’s annual revenue. Given its dwindling business caused by the falling price of the barrel – Mexican crude oil now costs $40.47 per barrel – the Peña Nieto administration is considering spending cuts.

Translation: Dyane Jean François