January 16, 2019 / 7:13 PM / a year ago

UPDATE 3-Fuel inventories build up in Mexico amid crackdown on theft

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MEXICO CITY, Jan 16 (Reuters) - Fuel continues accumulating at Mexico’s ports and storage terminals, the government and state-run Pemex said on Wednesday, as the government struggles to accelerate deliveries to gas stations via truck instead of speedier pipelines.

In a bid to halt rampant theft of gasoline and diesel, President Andres Manuel Lopez Obrador ordered key pipelines closed starting in late December, which has caused shortages and sparked concerns about the economic impact if the shortfalls are prolonged.

Mexico currently has almost 7 million barrels of gasoline, diesel and jet fuel in dozens of tankers anchored around Pemex’s ports waiting to discharge. Some 5.3 million barrels more are stored at terminals, said Pemex Chief Executive Octavio Romero.

In a press conference with Lopez Obrador, Romero also estimated that 3.8 million barrels of fuel purchased by oil company Pemex from different suppliers are on the way.

Due to Mexico’s limited storage capacity compared with its fuel consumption, which last year surpassed 1.4 million barrels per day (bpd), Pemex typically has a small fleet of tankers loaded with imported fuel at the Gulf of Mexico acting as “floating storage.”

But the number of vessels waiting to discharge, mostly bringing imports from the United States, has grown to about 45 tankers this week, including a group of ships at ports on the Pacific coast, according to Refinitiv Eikon data.

Mexico in November also resumed importing crude from the United States after more than a decade by awarding refining firm Phillips 66 a tender to buy Bakken crude.

A 300,000-barrel crude cargo arrived in the country in December, according to Lopez Obrador, who has vowed to reduce fuel imports and has been a harsh critic of the country’s 2013-14 energy reform, which opened up the sector.

A drop in local oil output, which stands at 1.8 million barrels per day (bpd), led the country to resort to imports of light oil in November and December to make the crude mixtures required by several local refineries, the president said.

“We have to replace production. There are two options: we buy light crude for refineries or we buy gasoline,” he said during his regular press conference. “We are doing both, but at the same time we want to review with precision the reason for the fall in oil production.”

Lopez Obrador’s main plan for the oil industry involves building a new mid-size refinery to boost fuel production while reducing crude exports and imports. (Reporting by Ana Isabel Martinez and Veronica Gomez; writing by Julia Love and Marianna Parraga Editing by Phil Berlowitz)

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