Pemex takes ownership of Deer Park refinery
By Amanda Drane STAFF WRITER
Shell Oil Co. has sold its 50 percent stake in the Deer Park refinery to Petroleos Mexicanos for $596 million.
Pemex will offer employment to about 1,000 full-time workers at the Deer Park refinery, but some 1,000 contractors have no guarantee of keeping their jobs.
Mexico’s state-owned oil company on Thursday closed the deal to acquire its first U.S. refinery, planting Petroleos Mexicanos’ flag firmly in Greater Houston as others back away from fossil fuels.
Shell Oil Co., the U.S. subsidiary of Royal Dutch Shell, had owned the refinery for more than 90 years. Now, Pemex — which owned half the refinery — bought Shell’s 50 percent ownership for $596 million in cash and debt. Pemex also paid Shell $325 million for inventory inside the facility.
The refinery is one of many Shell is unloading as it positions itself for a global transition to clean energy and marches toward its net-zero emissions targets. Pemex and Mexico are doubling down on fossil fuels as they try to achieve President Andrés Manuel López Obrador’s nationalist goal of exploring, extracting — and refining — his own country’s oil.
The Deer Park purchase gives Pemex an avenue to process its heavy domestic crude and convert it into gasoline — its existing refineries are not capable of converting heavy crudes, said S&P Global Platts Analytics analyst Lenny Rodriguez. The Deer Park refinery has a coker unit, equipment that gives Pemex that capability. The refinery can process up the 340,000 barrels of crude per day.
Analysts have raised questions about the capacity of Pemex to operate the Deer Park refinery. The Mexican oil company, roughly $120 billion in debt, has six domestic refineries that are badly in need of investment, analysts said.
“Obviously, they’re not focused on the business sense of the deal. They’re focused on energy sovereignty,” said Tony Payan, director of Mexico Studies at Rice University’s Baker Institute. “(López Obrador) thinks that Mexico should not be in the business of exporting oil; it should be in the business of refining instead.”
Pemex did not reply to messages requesting comment.
López Obrador took office in 2018 and has since walked back market reforms that ended Pemex’s 75-year monopoly and aimed to attract foreign capital and competition to revive the nation’s flagging energy industry.
His efforts to maintain Pemex’s preeminence and stifle foreign competition in Mexico have spurred complaints from the U.S. energy industry.
U.S. critics have described López Obrador’s policies as “slow rolling expropriation.” In one high-profile move, the Mexican government last year awarded control of an offshore oil field discovered by the Houston oil company Talos Energy to Pemex.
Deal delayed
The deal for the Deer Park refinery was delayed as it awaited approval from the Committee on Foreign Investment in the United States, a federal panel that reviews deals involving foreign investment. U.S. Rep. Brian Babin, R-Texas, wrote a letter last month to Treasury Secretary Janet Yellen and Energy Secretary Jennifer Granholm, asking them to stop the deal and arguing that Pemex lacks the resources and technical know-how necessary to run the plant.
The committee approved the deal near the end of December, but it was further delayed by an antitrust lawsuit filed by a pair of laundromat owners from New York who alleged the sale would cause energy prices to increase and harm their business. Their request for a temporary restraining order was denied earlier this month, clearing the way for the deal to close. The suit remains active.
Deer Park Mayor Jerry Mouton said his city would maintain the close communications with Pemex that marked the relationship with Shell.
“The Shell leadership has been a long-term partner of the City of Deer Park and we expect no changes in communication with the leadership at Pemex,” he said in a statement. “Public safety has always been our top priority for our residents, and it will remain top priority during the refinery’s transition.”
About 1,000 full-time workers at the refinery will be offered employment by Pemex, the companies said in May. Some 1,000 contractors who work at the refinery are not covered by the agreement and have no guarantee of keeping their jobs.
Shell is in the process of unloading its refineries — it will keep only one in the U.S., in Norco, La. — as it progresses toward its net-zero emissions goals, said Andrew Logan, senior director of oil and gas at the nonprofit Ceres, which advises on sustainable investing.
“They’ve made clear that they see refining as a dying business,” Logan said.
Back to the future?
Neil Carman, the Sierra Club’s clean air program director, said he fears a repeat of what happened when the Brazilian government’s state-controlled oil producer, Petrobras, took over the Pasadena refinery in 2006. It racked up $3.5 million in civil penalties after attracting legal action from environmental groups, including the Sierra Club, and was ordered to reduce emissions at the refinery.
Mexico City is notoriously polluted, Carman said. “I don’t think this is good news.” amanda.drane@chron.com