Photographer: Paul Smith/Bloomberg

Newest Texas Refineries Plan to Turn Shale Into Fuel for Mexico

  • Goal is to send gasoline, diesel by rail across border
  • Eagle Ford shale crude to be used as feedstock for Raven plant

The newest oil refineries in Texas are looking to join the hottest two plays in the North American oil industry.

Raven Petroleum LLC and MMEX Resources Inc. are building refineries in the Eagle Ford and Permian Basin that will process ample local supplies of light crude into gasoline and diesel. The fuel will be shipped on existing rail lines across the border to Mexico, where the government has opened the market to foreign competition, attracting companies including BP Plc and Glencore Plc.

U.S. shale drillers have doubled the number of rigs seeking oil since May, with most of the gains seen in Texas. Production nationwide is expected to approach the all-time high from 1970. At the same time, Mexico’s gasoline demand is outpacing local supply, forcing the nation to increase imports, which government data show grew 3 percent year-on-year in 2016.

"It looks like they are a set of entrepreneurs that see opportunities in the refined fuels markets in Mexico as it’s getting deregulated and denationalized," Neil Earnest, president of industry consultants Muse Stancil, said by phone from Dallas. "If you are sitting in Texas, you are sitting on low cost crude oil."

South Texas

The Woodlands, Texas-based Raven’s proposed 50,000-barrel-a-day refinery, about 70 miles from the border in Duval County, will produce gasoline and low-sulfur diesel starting by early 2019, Christopher Moore, the company’s managing director, said in a phone interview this week. MMEX Resources plans to build a similar-sized refinery in West Texas.

The refinery’s location about 50 miles east of Laredo is close to its feedstock supply from the Eagle Ford shale, as well as to the market for its products in Mexico, he said.

The Mexican government has been taking steps to deregulate its fuels market, with the latest measure being phasing out government-set pump prices. Mexico’s fuel prices rose by about 20 percent on average in January as the government raised the maximum pump price. The prices increases were part of reforms to open state-owned Petroleos Mexicanos’s monopoly to foreign competition and lure in private investment.

"Demand for fuels in Mexico is growing at over 3 percent per year," Moore said. "A constrained market won’t be resolved internally, so it will have to import as they are doing now."

— With assistance by Amy Stillman

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE