The Dallas Morning News
May 13, 2003

Pemex is about to revamp refinery

$1.65 billion plan is largest infrastructure project of Fox's term

By BRENDAN M. CASE / The Dallas Morning News

MEXICO CITY State-owned oil monopoly Petróleos Mexicanos will launch the reconfiguration of a major refinery complex this month, embarking on the "single
largest infrastructure project" of President Vicente Fox's six-year term, officials said Monday.

The $1.65 billion plan calls for nearly doubling the capacity of the "Gen. Lázaro Cárdenas" refinery in Minatitlán, a Gulf Coast town in the state of Veracruz.
Petróleos Mexicanos, or Pemex, controls all oil exploration, production and refining south of the border, as well as gasoline sales.

The reconfiguration will consist of six contracts that will be put to public tender in a process that will begin this month. Officials aim to finish the project by 2007.

"This is part of Pemex's growth strategy," said Raúl Muñoz Leos, Pemex's director general, at a presentation Monday with Mr. Fox.

Oil remains a keystone not just of the Mexican economy but also of Mexicans' sense of independence with regard to the United States. The nation expropriated
foreign oil companies' holdings in 1938 to create Pemex.

Last week, the U.S. House of Representatives' foreign relations committee said any U.S. initiative to allow more legal migration from Mexico should be
accompanied by measures to permit more private investment in Pemex. Mr. Fox vowed not to sell the monopoly on Monday, drawing strong applause from Pemex
executives.

But critics have long charged that Pemex has neglected its refining and petrochemical arms in favor of crude oil production. As a result of inefficiency and outdated
equipment, Pemex still imports a significant amount of gasoline from a plant it helps operate in Texas.

Recent reconfigurations of other refineries have been plagued by corruption and delays. But Mr. Fox's government has fought corruption in Pemex, and he said
reconfiguration projects will soon help Mexico curb gasoline imports.

"Minatitlán has been in service for 40 years," Mr. Fox said. "This reconfiguration will significantly reduce our imports of finished products," such as gasoline.

The reconfigured refinery will produce about 350,000 barrels of refined products per day, compared with its current output of less than 200,000. Its products will
include gasoline, jet fuel and diesel.

The refinery will also boost its consumption of heavy Maya crude Mexico's most abundant and least valuable grade of oil.

"It's better to process more of the Maya in Mexico, because it's less valuable on world markets," said George Baker, president of Baker & Associates in Houston.