The Dos Bocas refinery is currently navigating start-up challenges. Despite numerous reports, we remain confident in our prediction that the refinery will begin operations in December 2024. Pre-commissioning for the first train of the CDU (170 kbd) unit is planned for November, with crude intake slated for December and ramp-up operations set to commence in Q1 2025.

Today’s Daily discusses the Dos Bocas project, officially known as the Olmeca Refinery – one of North America's most eagerly awaited and transformative refinery startups in recent years. Located in Tabasco and developed by Mexico’s state-owned Pemex, this 340kbd full-conversion refinery boasts a Nelson Complexity Index (NCI) of 9.2. Designed to optimize gasoline production, it features an extensive 105 kbd Delayed Coker and 94 kbd FCC unit.

Once fully operational, Dos Bocas will process 340 kbd of Mexican crude, producing over 160 kbd of gasoline and around 140 kbd of middle distillates, significantly altering Mexico’s refined product import dynamics. Mexico’s clean product imports have recently been around 700-750 kbd. The commissioning of the Olmeca refinery will reduce this dependency, but significant on-the-ground changes are not anticipated until the secondary units stabilize (from CDU train 1 feed), which we project will be by the end of 2025.

The Dos Bocas project kicked off in 2019 with a hopeful target to start up by 2022, but that timeline proved too ambitious. The Mexican government has repeatedly given assurances since mid-2023 that construction was finished, and a launch was just around the corner, nearly a year has passed with no major progress. This is evident from Mexico’s ongoing high import of refined products and the lack of exports ( straight run high sulphur products) from the Dos Bocas terminal. Crude exports from Mexico have remained steady as well.

Olmeca refinery crude unit startup time line and processing rate (kbd).

Source: Kpler

According to sources and the Kpler S&D model, the startup of the first train’s crude unit, including the feed cut, is projected for December, with pre-commissioning activities starting in November. We anticipate a gradual ramp-up from December 2024 to February 2025. Crude processing is expected to begin increasing in January, reaching a steady rate of 85-90 kbd by Q2 2025. By Q3 2025, the first train is likely to stabilize at around 70-75% of its capacity and continue at this rate as the refinery is expected to start commissioning the second train (170 kbd) of the crude processing unit. The second train is expected to ramp up from October to December 2025, achieving a stable processing rate of 85 kbd by the end of Q1 2026 and further stabilizing at 80% capacity (135 kbd) by the end of Q2 2026. Overall, we do not expect Dos Bocas to achieve consistent, meaningful fuel output until at least Q2 2026. While this may seem pessimistic, it reflects a realistic outlook considering the project’s ongoing operational challenges and the historical performance issues within Mexico’s refining sector.

It's crucial to note that, despite the Olmeca refinery being designed for Maya crude, initial operations, and ramp-up will likely use Isthmus or Olmeca crude grades due to the refinery's complexity and the unavailability of secondary units. Once fully operational, the Olmeca refinery will absorb about 300,000 b/d of Maya crude, reducing Mexico’s exports of this heavy-sour crude and tightening the regional availability of such oil, which will likely narrow light/heavy differentials. Additionally, the combined ramp-up of the Olmeca refinery and the startup of Nigeria’s Dangote refinery is expected to pressure cracks and margins downward, potentially leading to a wave of rationalization in Europe.

Barring major setbacks, Olmeca is expected to reach full commercial operations by the end of 2026, with a refinery (including secondary unit) utilization rate approaching 80%. Gasoline and diesel production are projected at about 130,000 b/d and 110,000 b/d, respectively. While Olmeca has the potential to significantly impact global refined product markets and reduce Mexico’s reliance on fuel imports, it still faces substantial startup and operational risks, akin to those encountered by the Al Zour, Jizan, Dangote, and Yulong refineries. Despite optimistic statements from the refinery operators, we approach its substantial startup phase with a measure of caution.

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