US approves $1.2bn Pemex purchase for Shell refinery

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According to Andres Manuel Lopez Obrador, President of Mexico, Petroleos Mexicanos (Pemex), the US government approved Petroleos Mexicanos' bid to purchase Shell Deer Park.

The president, commonly known as AMLO, said Wednesday that "it's something historical."

Pemex was waiting approval from the US Treasury Department for Shell's stake at the Texas plant. This would allow it to expand its refining capabilities and ensure that the state oil producer has sufficient fuel supplies. AMLO is seeking to expand state control over the country's energy markets and refine all its oil. It also wants to reverse more than a decade worth of production declines.

A representative from the Treasury Department declined to comment.

AMLO announced that the acquisition would cost $1.2 billion. This is more than double the price of the deal the company announced in May. Pemex Chief Executive Officer Octavio Romaro stated Wednesday that the company will repay the debt of the refinery to complete the acquisition, tapping Mexico's National Infrastructure Fund.

Bloomberg reported previously that Pemex could spend approximately $1.6 billion to acquire the refinery. The infrastructure fund and a bridge loan were used by commercial banks to repay the debts. This part of the deal was not clear at the time.

Pemex Refinery Deal May Be $1 Billion More Than Previously Known

Pemex makes the acquisition despite its dire financial situation. The government has been injecting billions into the company to help pay off debts that have risen to $113 billion. This is the highest amount of any oil company worldwide.

Marcelo Ebrard, Mexico's Foreign Affairs Minister, stated that the Committee on Foreign Investment in America approved the sale via a letter. Ebrard stated that there were no pending national security issues and that the review of the sale was completed, citing the letter.

CFIUS reviews foreign purchases of U.S. infrastructure critical for national security.

Shell had previously stated that the deal would close in early next year subject to regulatory approvals.

This sale has been controversial. Critics claim that it could impact national energy security in the US due to rising gasoline prices and concerns that Pemex lacks expertise and the financial resources to operate a US refinery.

Two New York businessmen filed a lawsuit last week in Houston against Pemex, claiming that the sale would raise gasoline prices and affect their business's energy costs. CFIUS was notified by Brian Babin, a US Representative. He claimed that Pemex had no record of operating refineries according to international standards.

Pemex has six Mexican refineries, which it owns and manages. However, due to a lack in investment, they are only operating at half their capacity and Mexico imports nearly 80% of its gasoline. Pemex is building a 240,000 barrel-a-day refinery, which will be located in AMLO's hometown of Tabasco. This project has exceeded the budget of $8 billion that was originally estimated by the government.