While debate continues in the U.S. about whether to allow oil companies to export their wares overseas, a deal has been struck with Mexico for an oil exchange. The Mexican state-owned oil company Petroleos Mexicanos, or Pemex, has received a license to import up to 75,000 barrels of light American crude per day in exchange for heavier crude from Mexico. While its original plan was to import 100,000 barrels per day, the revised, year-long license still represents a striking change in U.S. oil policy. It represents the first time in over 40 years that the American government has allowed large scale exports of domestic oil products.
Potential for Enormous Overall Exports
While the license granted to Pemex is less than originally anticipated, it still has the potential for impressive export numbers. A director at Pemex’s corporate partnership and new business department has reported that up to 27 million barrels of American light crude could be processed over the year in refineries across Mexico. The deal specifies that the crude must be refined at home and not re-exported. At the same time, the U.S. would receive heavy Mayan crude. American domestic refiners are especially well-equipped to accommodate this type of oil, making for an efficient, mutually beneficial trade.
The deal comes at an excellent time for both parties. Pemex has been having a particularly hard time coping with the worldwide decline in oil prices. The low price of oil combined with the depreciating value of the peso against the U.S. dollar have resulted in a loss of 167.6 billion pesos ($9.9 billion USD) in the third quarter of 2015 alone. The trade deal can help Pemex generate revenue by increasing the output of gasoline and diesel, among other benefits. The deal also poses an opportunity to help move the vast stores of U.S. oil that have resulted from a dramatic increase in domestic crude production, which has increased from 5.3 million barrels per day in 2009 to 8.7 million today.
Benefits for a Host of Companies
Opening up new markets is seen by most as being highly beneficial to the domestic oil industry. In addition to refining imported oil from Mexico, many wells throughout America’s shale formations still contain a wealth of untapped crude, waiting for markets to open up for increased sales and oil production. Fluid control products from Southwest are essential at multiple stages of the drilling and refining products, providing the highest levels of quality with the industry’s most competitive prices and lead times. The initial trade deal with Mexico begins in November and is set to last one year, but support for lifting the oil export ban continues to grow. As the market continues to develop, the experts at Southwest will be there. Contact us today to learn how our products can serve applications ranging from drilling to refining and beyond.