Petroleos Mexicanos and Shell Oil Co. have signed a memorandum of understanding to form a joint refining venture involving Shell's 225,000 b/d Deer Park, Tex., refinery.
Under the agreement, Mexico's state owned oil company is to purchase a 50% interest in the refinery, and Shell is to sell Pemex unleaded gasoline on a long term basis.
Financial and other details of the agreement are not disclosed. Detailed agreements and government filings needed to form the venture are expected to be complete by yearend.
Under the venture, Shell and Pemex plan to add undisclosed conversion and upgrading units tailored to process heavy Mexican crude.
The revamp will allow Pemex to place more than 100,000 b/d of Mayan heavy crude on the U.S. market. Mayan accounts for 70% of Mexico's crude oil exports.
In turn, Shell will sell Pemex as much as 45,000 b/d of unleaded gasoline to help meet Mexico's rapidly growing demand. And the refinery upgrade will enable Shell to produce the required volumes of reformulated gasoline called for under the U.S. Clean Air Act.
Deer Park, on the Houston Ship Channel about 20 miles east of Houston, is Shell's largest integrated refining/chemical complex.
Both companies see long term benefits from the venture.
Pemex Director Gen. Francisco Rojas said the venture "reinforces Pemex's position as an exporter of crude and cost effective supplier of gasoline for Mexico.
"The investment in one of the U.S. industry's major oil refineries offers the potential for Pemex to reap a strong return on its investment in the near term without affecting its plans for other refining investments within Mexico."
Shell Pres. Frank Richardson said, "In view of the difficult economic climate facing the oil industry today, the partnership will strengthen the competitiveness of the Deer Park refinery, which is a key element of Shell's long range strategic plans."
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