The New Leftist Mexican President Will Have One Opportunity To Get This Right -- Let Us Hope He Succeeds -- March 6, 2018

A reader linked me to a SeekingAlpha article that we both thought was ludicrous, ridiculous, bizarre, and worthless. The writer suggested that if Trump stays true to his convictions, he will put tariffs on imported oil. We've heard that before. I won't include the link -- I'm foregoing links to click bait.

In response to that e-mail from the reader, I replied (not ready for prime time):

I agree (the writer is off his rocker, or jumped the rails or smoking something). I read the summary and then the first sentence or two. I have no idea if the writer knows what he is talking about.

There are two extremes right now in the global crude oil discussion:

• shale is not going to be all it's cracked up to be (Mark Papa, others)
• US shale could end up destroying OPEC (IEA)

Very few people talk about the heavy oil / light oil issue. The fact is that unless US refineries are reconfigured to optimize light oil, the US will need to import heavy oil. And I don't see US refiners doing much to re-do their plants; they did it once in anticipation of the Keystone XL and it turned out to be a huge mistake; they are not going to do that again.

There are too many alternatives to making money in oil for the next ten years, and new refineries are low on the list. It's headline news when a new refinery is proposed or an older refinery expands. Right now it looks like crackers and pipelines and LNG exports that has everyone's attention.

But back to the story. That SeekingAlpha story was simply clickbait.

Now, two hours later, I come across this ArgusMedia article -- and this is why I love to blog. Serious writers understand the big picture, and in this case ArgusMedia really "gets it." The article at the link:

Mexico's vision of the future of exploration and production in Latin America includes a throwback — developing extra-heavy crude oil reserves to feed US Gulf coast refineries calibrated for that grade.

While the country recently launched a tender for unconventional onshore reserves along its northern border, the country's national hydrocarbon agency director Juan Carlos Zepeda said today that the country sees its 3.1bn bl of 3P extra-heavy oil reserves as a "short-term investment opportunity."

"The margin between WTI and heavy Canadian crude is at its narrowest in several years," Zepeda said at the CERAWeek conference in Houston today. "The Gulf coast refineries were designed to process heavy oil from Mexico and Venezuela, where its production has been in decline. Heavy oil in the Gulf of Mexico is going to be in high demand."

Zepeda said about half of these reserves are in the Ayatzil field, for which state-run Pemex holds the rights. Investment there would depend on additional farm-out agreements.

Much, much more at the linked article. I would like to include it all so it's not lost to the ether but that would not be "fair." If you've read this far, I highly recommend you finish the article at the link.

My first thought: I certainly hope the new leftist president of Mexico does not screw it up. He will get one opportunity to get this right.

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