Mexico starts oil industry 'rescue' with refinery overhaul

MEXICO CITY (AP) — Mexico's new government detailed plans Sunday to build an $8 billion oil refinery in the home state of President Andres Manuel Lopez Obrador and to renovate six others as the oil-producing country attempts to lower its dependence on imported fuel.

Speaking from the Dos Bocas port in the Gulf Coast state of Tabasco, Lopez Obrador blasted the neglect that has fallen on Mexico's oil infrastructure and the idea that Mexico is better off buying fuel from abroad.

"How do we respond to that absurdity that we are dedicated to selling crude oil and buying gasoline, as if we sold oranges and bought orange juice?" he asked the crowd.

Lopez Obrador, who took office Dec. 1, plans to direct 75 billion pesos ($3.65 billion) of savings from a government austerity program into the state oil company, Pemex, which has struggled to come up with extra funds for expansion amid mounting pension obligations, high tax rates, rampant fuel theft and declining output.

Pemex is producing less than 1.8 billion barrels a day of crude, putting Mexico on track for its 14th consecutive year of declines in oil output.

President Lazaro Cardenas nationalized the industry in 1938, kicking out 17 foreign oil companies that Mexicans believed to be looting the country's wealth. But Mexico's constitution was amended in 2013 to allow greater private investment in oil and gas.

Lopez Obrador dismissed the energy sector opening as a failure, saying that foreign investment over four years has amounted to just 2.5 percent of what Pemex invested during the same time period.

"The foreign investment didn't come," he declared.

He also hinted that the planned refinery expansions would be taken on by Mexican companies, saying: "We're going to place our trust in Mexican entrepreneurialism."

Energy Minister Rocio Nahle said Mexico will import 80 percent of its gasoline needs this year because the country's refineries work, on average, at 38 percent of capacity due to a lack of maintenance and investment. She said the refinery overhaul should enable Pemex to meet 70 percent of Mexico's gasoline needs.