Pemex in the downstreamMarch 12, 2018
Carlos Murrieta Cummings, general director of Pemex Transformación Industrial (TRI), talks to TOGY about what the company is focusing on to remain sustainable and profitable, why alliances are significant for TRI’s operations and the steps the company has taken to improve refining activities.
TRI was formed by the merging of Pemex Refinación, Pemex Gas y Petroquímica Básica and Pemex Petroquímica. The company began operations in November 2015. The company is responsible for the refining, processing and commercialisation of refined petroleum products and petrochemicals. To carry out its operations, the company uses Mexico’s six refineries, as well as several other facilities.
On current focus: “This operational improvement can be carried out only as long as we are being careful with money. We are investing in those plants that generate more value and that have a greater impact on the production of distillates.”
On partnerships: “Carrying out alliances is crucial, which is why it was part of the company’s reorganisation. We want to make alliances with the best companies in the industry in certain areas, especially those areas that are not part of TRI’s core business, such as auxiliary services, but also some refinery expansion alliances, such as the coking plant in Tula.”
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Given TRI’s operational and financial situation, what is the company concentrating on?
We need to reverse our losses, which were very significant in 2016. Our goal is to minimise or completely eliminate them. To achieve this, we are working on three elements that are under our control, and another one, in which we are collaborating with the authorities.
We are making every decision while focusing on the creation of economic value. Previously, this wasn’t necessarily the case. If we could push more volume, we processed more volume, for each barrel we imported, we lost up to USD 7. The objective was to keep refineries running, even if it meant losing money. To do that efficiently, it was very important that there was no loss in import prices, and that we use price calibration to reflect the international opportunity cost. We are currently importing more, but we are not losing any money. Now, we are earning money with this.
What strategy will TRI employ to achieve its objectives?
This first part of our strategy will allow us to free up some resources, so we can move onto the second part, which is to focus on operational improvement. This operational improvement can be carried out only as long as we are being careful with money. We are investing in those plants that generate more value and that have a greater impact on the production of distillates.
At the same time, we must take perfect care of safety, reliability, profitability and sustainability – the four axes that we are pursuing with this second element. Alliances free up money for other purposes and that money allows us to improve our refineries.
The third element is that we are working very hard on looking after everything involved in fuel supply. In fuel supply, we make sure that we use the best routes at the lowest possible cost and that the international opportunity cost of the product is acknowledged in our prices. There is no reason why we should sell below the international opportunity cost. These three elements are the core of our strategy and of all that we have been working on.
The fourth has to do with everything concerning fuel theft. We are working in a very strong and co-ordinated way with the authorities to reduce or eliminate it. These four elements together are the central axes of everything we do and are essentially the guide that steers our specific actions.
How will alliances or partnerships help TRI?
Carrying out alliances is crucial, which is why it was part of the company’s reorganisation. We want to make alliances with the best companies in the industry in certain areas, especially those areas that are not part of TRI’s core business, such as auxiliary services, but also some refinery expansion alliances, such as the coking plant in Tula. We are now in the process of looking for a partner for that project, as well as partners for hydrogen and water treatment.
A partnership will not alone make us go from negative to positive. We now have firm offers for both the Madero and Cadereyta refineries. They will be announced very soon.
This is crucial because it is a way of working in which Pemex stops feeling as though it is the only company that can do it and adopts a completely open attitude. Even though these are small examples, they are very important in the context of the perspective of the company’s culture and regarding what Pemex is looking for.
What has TRI done to minimise fuel theft?
We had fuel theft of 20,000 bpd in 2016. We have collected all the information regarding our sales and where the product is lost and have given it to the authorities.
We are also taking great care that our sales points, the petrol stations, comply with their volumetric controls and that those volumetric controls correspond to what they are buying from us. If they sell more or less, it means that there is a distortion. They might be selling litres that are not actually litres and, therefore, sell more than they buy from us. On the contrary, they might be selling a different amount than what they buy from us, which might indicate that they are being supplied by someone else. These are the types of things we are paying attention to.
What measures is TRI taking to improve its refining capacity?
This is a critical point for us. We want every barrel that runs in the refineries to generate a positive variable margin. If we see that there is a type of crude oil that does not generate a positive variable margin, we will not process it because it is of no benefit to us.
Previously, Pemex had a volumetric goal policy, which is very important, but we cannot try to achieve a volumetric goal at the expense of losing money. This is what happened in Madero. The entire Madero refinery was scheduled for a halt to perform great maintenance for the first time in its history. The shutdown was scheduled from September 2017 to February 2018, with a complete shutdown in December 2017. We restarted power and utilities there in January 2018. We are performing major maintenance to make it profitable.
First, we need to know how much money we will make out of the refinery and then decide whether or not we are going to operate it. We decided to move some maintenance procedures at the Salina Cruz refinery that were initially scheduled for October 2017 to an earlier date, fix everything and restart operations, making money.
What maintenance programmes are scheduled for the country’s refineries?
The only two refineries we currently have scheduled for maintenance are Madero, which is close to a total stop; and Minatitlàn, which has entered a period of major repairs during the last quarter of 2017 up to the first quarter of 2018. We are going to repair 10 plants there. In the case of Madero, we are carrying out 29 projects that were stopped, cancelled or that had not been done due to a variety of reasons.
The Cadereyta, Tula, Salina Cruz and Salamanca refineries are not scheduled for maintenance. We have just had a serious problem once again with the Salina Cruz refinery, as a consequence of the earthquake on September 8, 2017. We did not expect that earthquake. Only a few days before it happened, we were operating the Salina Cruz refinery at full capacity and with perfect performance.
What specific measures is TRI adopting to increase industrial safety at its plants?
We are giving much more power to the person responsible for safety, who has full authority to halt the refinery. What we decided to do in Madero was above all a matter of safety and economy. Some time ago, money was used more for production than for safety. This situation is not ok.
First, you must operate in a safe manner and after that, you must focus on doing so profitably. If you do those two things, we will give you the permit and if you don’t, it doesn’t matter if you complain or if we need to import more. This is critical for the mindset we are trying to promote. If the plant is not secure or if it is not profitable, it cannot operate.
What is TRI’s commercial strategy?
In the beginning of October, we will present our whole commercial scheme, which reformulates the Pemex franchise and elaborates on new medium- and long-term contracts and alliances with clients with which we were trying to get one-year contracts and that are asking for three- or five-year contracts.
We have a commercial strategy that is oriented towards competing in accordance with the new market rules. We don’t want to abuse any monopoly power or anything that resembles that. We want to continue building on the great Pemex brand and all its virtues. We want to be perceived by the industry as a competitor and a player that is always relevant in the Mexican market and, in the longer term, not only in the Mexican market. The North American market is a very important market for the Pemex brand.
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