MOSCOW (MRC) -- Mexican state oil company Pemex on Thursday signed a long-term crude supply contract with Royal Dutch Shell Plc as part of its acquisition of the Deer Park refinery in Texas, reported Reuters.
Pemex and Shell in May announced the transaction, which is worth almost USD600 MM and will make the Mexican firm the sole owner of the refinery near Houston. The facility has capacity to process 340,000 bpd.
Shell will supply about 200,000 bpd of foreign and US 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. The transfer secures for Mexico a greater supply of fuel produced by the plant while reducing sales to gasoline retailers in the US.
Pemex separately agreed to supply the adjacent Shell Chemical plant with feedstocks, and made two-year job offers to the plant's salaried workforce, two sources said.
Pemex Chief Executive Officer Octavio Romero in a statement pledged to operate the plant safely and protect its staff and the environment. The refinery's new board of directors held its first meeting on Thursday, he said.
If Pemex suspends or reduces the volumes that are part of its supply contract, it would have to pay Shell between $50 MM and USD190 MM depending on the year it does so, according to the July document.
Pemex's fuel production declined by almost half between 2016 and 2020 and its refineries ran at less than 50% of their capacity in 2020. In contrast, Deer Park ran at 78% of capacity in 2020.
As MRC wrote before, Mexico carried out the transaction as agreed: USD596 MM for the refinery's assets - equivalent to Shell's 50% stake in the JV's debt - as well as the liquidation of the USD596 MM that made up Pemex's stake in the refinery.
We remind that Royal Dutch Shell plc. said in November, 2021, that its petrochemical complex of several billion dollars in Western Pennsylvania is about 70% complete and in the process to enter service in the early 2020s. The plant's costs are estimated to be USD6-USD10 billion, where ethane will be transformed into plastic feedstock. The facility is equipped to produce 1.5 million metric tons per year (mmty) of ethylene and 1.6 mmty of polyethylene (PE), two important constituents of plastics.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MR''s ScanPlast report, Russia's estimated PE consumption totalled 2,265,290 tonnes in the first eleven months of 2021, up by 14% year on year. Shipments of all grades of ethylene polymers increased. At the same time, PP shipments to the Russian market were 1,363,850 tonnes in January-November, 2021, up by 25% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased, whereas supply of injection moulding PP random copolymers decreased significantly.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
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