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Shell to supply crude to Pemex’s Texas refinery under long-term pact, sources say

Friday, 21 January 2022 | 21:00

Mexican state oil company Petroleos Mexicanos will sign a long-term crude supply contract with Royal Dutch Shell as part of its acquisition of the Deer Park refinery in Texas, according to a document and people familiar with the matter.

Pemex and Shell RDSa.L in May announced the transaction, which is worth almost $600 million and will make the Mexican firm the sole owner of the refinery near Houston. The facility has a capacity to process 340,000 barrels per day (bpd).

Shell is expected to supply about 200,000 bpd of foreign and U.S. crude to the plant for at least 15 years, according to a source and a July document seen by Reuters. A Pemex unit expects to supply up to 115,000 bpd of Mexican crude to the refinery and receive about 230,000 bpd of refined products that could go to Mexico.

Pemex separately has agreed to supply the adjacent Shell Chemical plant with feedstocks, one of the sources said.

Pemex Chief Executive Officer Octavio Romero is at Deer Park for the handover, one of the people said. The transfer came with a labor agreement allowing Pemex to absorb most of the refinery’s employees for two years, the source and the document said.

“The formal event will take place at around noon on Thursday in Texas,” one of the people said. A Shell spokesman confirmed the Thursday handover but could not immediately comment on other terms.

Pemex did not immediately respond to a request for comment on the handover, which Reuters reported last week.

The refinery purchase aids Mexico’s drive to become more self-sufficient in gasoline and diesel. Pemex’s fuel production declined by almost half between 2016 and 2020 and its refineries ran at less than 50% of their capacity that year. In contrast, Deer Park ran at 78% of capacity in 2020.

Mexico carried out the transaction as agreed: $596 million for the refinery’s assets – equivalent to Shell’s 50% stake in the joint venture’s debt – as well as the liquidation of the $596 million that made up Pemex’s stake in the refinery.
Source: Reuters (Reporting by Adriana Barrera and Ana Isabel Martinez in Mexico City; Additional reporting by Gary McWilliams and Marianna Parraga in Houston; Editing by Paul Simao and Daniel Wallis)

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