Pemex, the Mexican oil and gas giant is shipping crude oil to South Korea. January 2016 exports were up 11% over the previous month despite the lowest production levels since August of last year. All of this is happening in atmosphere of increased, maybe incredible, scrutiny, as Pemex struggles to adapt to low world oil prices, skyrocketing pension obligations and a very rocky road to reform.
Crude oil exports to South Korea began last year as part of Pemex’s diversification into other international markets. Those sales have continued throughout the past year, most of them going to Hyundai Oilbank Co. Ltd., with about a fifth going to GS Caltex Singapore Pte. Much of this diversification effort was made in anticipation of sliding oil prices provoked by the boom in U.S. shale gas which heavily affected the Gulf market where Pemex has been slowly losing dominance.
In 2014 Pemex exported an average of about 100,000 barrels a day to all of Asia. January of 2015 saw exports of 211,000 barrels a day to Asia, but that volume has continued to climb intermittently. Exports to Europe have also increased. January 2015 saw about 275,000 barrels a day bound for Europe.
Total exports this past January though, have been much higher, at about 1.12 million barrels per day to all destinations. Importantly, much of this crude is leaving from Salina Cruz Maritime Terminal and refinery on the Pacific coast, and not from the Gulf as had been the case with previous shipments. Asia shipments were scheduled for Japan and Korea. This was the first delivery to Japan’s Cosmo Oil in more than ten years.
Gulf coast refineries in the United States have long been the primary recipients of Mexico’s Gulf of Mexico crude oil production facilities. But flagging prices and changes to the way Pemex does business have necessitated a strategy of broad diversification and new business models.
Pemex has been struggling to remake not just its image but its long debilitated infrastructure in order to better compete with world oil suppliers. Pemex is also slated to deliver one million barrels of crude to GS Caltex in South Korea in May of this year. Luring investment into the company and into the petroleum industry more generally will require a much more competitive and leaner Pemex. That means a Pemex that can not only compete, but react quickly and effectively to fulfill orders from much more far flung places.
Mexico’s oil market continues to attract attention as Pemex shakes off its moribund reputation under new and promising political reforms. 2012 energy market reforms and this past year’s successful auctioning of Gulf of Mexico oil-field contracts have all met with promising results. As increasing numbers of private and foreign investors enter into the market the technical and engineering challenges continue to be met, and more strident and responsive moves are expected for the coming year.