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  1. An Update of Mexican NGL’s Rodrigo Aranda NGL’s Trading - PMI A presentation for: The Petrochemical Feedstock Association of the Americas (PFAA) Fourteenth Annual Conference Barton Creek, Austin Tx. November 8th, 2007

  2. Topics • Introduction • NGL: main source points and applications • NGL processing centers • Natural Gasoline and N+A Naphtha • Natural Gasoline • N+A Naphtha • Forecasts • Liquified Petroleum Gas (LPG) • Demand and Consumption • Production • Imports • Distribution and Pricing • Outlook • Special Projects • Conclusions

  3. Introduction: About PMI… P.M.I. • PMI is a group of companies which acts as the international trading arm of Petróleos Mexicanos (PEMEX). • With operations worldwide, P.M.I. handles all of PEMEX's crude oil and oil product exports and imports, supplying and sourcing products to and from different markets around the world. Crude oil Refined products NGL’s Petrochemicals

  4. METHANE Sent to Coatzacoalcos for petrochemical processes PROPANE Consumed as fuel for Internal processes ETHANE Sent to Morelos and Cangrejera for Ethylene production HEXANE Mixed with oil LPG 90% of LPG comes from Nuevo Pemex, Cactus y Coatzacoalcos NATURAL GASOLINE Sent to Pajaritos for waterborne exports Introduction: Mexican NGL’s Origins and Applications Condensates from Gas Processing Plants

  5. Pipelines Gas Processing Centers Introduction: NGL’s Processing Centers in Mexico / Burgos BURGOS

  6. 160 140 39.7 120 100 10.3 80 MBD 23 9.3 74.4 60 42.1 38 41.7 0.8 40 2.2 20 37.6 36 34.4 34 24.7 4.1 1.1 11.8 4.4 2.6 1.1 0 Cactus Nuevo Pemex Morelos La Cangrejera PozaRica Pajaritos Reynosa Matapionche Ethane LPG Natural Gasoline Source: Statistical Yearbook 2006 NGL Fractionation by Processing Center kbd Ethane 180 LPG 205 Natural Gasoline 88

  7. Natural Gasoline Streams

  8. Natural Gasoline Streams • “Naphtha” is a generic term used in Mexico for natural gasoline. • Mexico’s natural position is long. • Mexico remains as one of the main exporters of natural gasoline in the world. • Mexico’s natural gasoline streams are: 1) “Cactus Naphtha” 2) “Burgos Naphtha” (formerly known as “Reynosa Naphtha”) Burgos Naphtha comes from the Burgos Gas Processing Center in the Northeast region of Mexico next to the U.S. border. Cactus Naphtha comes mainly from the Cactus, Nuevo Pemex and Ciudad Pemex Gas Processing Centers, in the Southeast region of Mexico

  9. Cactus Naphtha Specs • Cactus is well known as a petrochemical feedstock mainly used for cracking… • Cactus specs are:

  10. Cactus Naphtha Production Sites Source: PEMEX Statistical Yearbook 2006

  11. Cactus Naphtha Logistics • A closer look on Cactus logistics… • Overall production: 88 kbd • Volume for export: 70 kbd • Volume for domestic use (petrochemical): 18 kbd • Transported from Gas Processing Centers to Pajaritos Terminal on the Gulf of Mexico • From Pajaritos, shipped waterborne to destination ports in USGC and other regions in the world La. Tx. Main destination areas 2-day voyage Pajaritos (Little Birds) Gas Processing Centers

  12. Burgos Naphtha Specs • Burgos is a stream coming from both Burgos and Reynosa plants. It may be used either as a petrochemical feedstock or even gasoline blendstock due to its low sulfur content… • Burgos specs are:

  13. Burgos Naphtha Logistics • A closer look on Burgos logistics… • Overall production: 9 kbd (expected to increase up to 20 kbd towards 2010) • Volume for export: 9 kbd • Transported from Burgos Gas Processing Center to Brownsville by pipeline and trucks • From Brownsville, shipped waterborne by barge to destination ports in the U.S. La. Tx. Main destination areas Brownsville Burgos Gas Processing Center

  14. N+A Naphtha • Pemex Refining still produces about 36 kbd of N+A naphtha at La Cangrejera complex in Veracruz. • Almost all N+A produced goes to the BTX plant that Pemex Petrochemicals owns at the same complex La Cangrejera. • The rest of the N+A produced goes to Pemex Refining for refining processes. • Sometimes Pemex Refining sends product to other refineries, but that is rare. • The BTX plant at La Cangrejera has a total capacity of 45 kbd so it is still necessary for Pemex to import product. • PMI has importing roughly 9 kbd of N+A naphtha since 2006. • The main specifications for N+A naphtha required by Pemex are:

  15. Naphthas and Natural Gasoline: Distribution of Logistics WATERBORNE EXPORTS 93% WATERBORNE IMPORTS 4% INLAND3% WATERBORNE97% Source: PMI

  16. Forecasts Natural Gasoline • The forecast for Natural Gasoline Production (Cactus + Burgos) is shown below in kbd N+A Naphtha • Pemex Refining is expected to maintain its production of N+A naphtha in 36 kbd through the year 2010. • Pemex Petrochemicals is expected to need 45 kbd in order to keep its BTX plant running at capacity. Imports of N+A should continue though quota may decrease. Source: Pemex-Gas y Petroquímica Básica

  17. Liquified Petroleum Gas (LPG)

  18. Mexican LPG Demand per capita (2005) • Mexico is the largest consumer of LPG per capita in the world • More than 70% of Mexican families depend on LPG as a heating fuel Source: SENER, PEMEX

  19. LPG has remained as the preferred source of heating fuel over the years while natural gas has substituted wood by 2-3% Mexican LPG consumption per capita Kg/Inhabitant (States) 160 to 170 (4) 120 to 159 (6) 80 to 119 (13) 40 to 79 (8) 0 to 39 (1) Source: PEMEX

  20. Main factors for demand drop: Natural gas competition in Residential and Services sectors Climate change Savings due to increased efficiency of LPG fueled devices Higher prices of LPG relative to wood or coal LPG Demand growth in Mexico (1995-2005) • AAGR = 2.1% Source: SENER, PEMEX

  21. Mexican LPG Consumption by sector (%) • Although the share of vehicle fuel has increased over the last ten years, the residential sector remains the main market for LPG in Mexico. Source: SENER, PEMEX

  22. There are 5 regional divisions in Mexico Mexican LPG Demand by region 314 kbd NORTHEAST NORTHWEST CENTRAL • The CENTRAL and WEST CENTRAL regions are the areas of highest demand WEST CENTRAL SOUTH-SOUTHEAST Source: SENER, PEMEX

  23. Sources for NGL’s and LPG Production in Mexico Natural Gas Ethane Non Associated Gas Sour Gas and Liquids To Processing Plants LPG Associated Gas Naphtas Processing Plants LPG Crude Refinery Gas Crude Oil to exports Crude Oil • Mexico has three different sources of LPG: • Gas Plants • Refineries • Imports (balance) Source: PEMEX

  24. PEMEX ranks among the top ten NGL fractionators in the world. Processing Nat Gas: 3,879 Mcfd Condensates: 102 kbd Production Dry gas: 3,147 Mcfd Gas liquids: 436 Mbd LPG: 215 Mbd Sweetening plants: 20 Sour wet gas capacity: 4,503 Mcfd Sour wet condensates capacity: 144 Mbd Criogenic plants: 17 Capacity: 4,992 Mcfd LPG distribution terminals: 20 Pipeline systems: Natural gas: 9,016 km Products: 3,051 km PEMEX Stats Source: PEMEX

  25. PEMEX LPG Production sites (Gas Plants, kbd) Arenque, 9.9 Reynosa, 4.4 Cactus, 40.2 • Total 2005 supply: 216 kbd • Nuevo PEMEX gas plant is the largest LPG producing facility in the country Cangrejera, 43.6 Morelos, 42.1 Nuevo Pemex, 70.4 Poza Rica, 2.7 Matapionche, 2.2 Source: SENER, PEMEX

  26. PEMEX LPG Production sites (Refineries,kbd) Cd. Madero, 1.3 Cadereyta, 3.3 Salina Cruz, 8.3 Minatitlán, 6.5 Tula, 8.1 Salamanca, 3.8 • Salina Cruz and Tula are the refineries with the largest production of LPG • Total 2005 supply: 31 kbd Source: SENER, PEMEX

  27. PEMEX LPG Transportation and Storage Facts • PEMEX infrastructure includes: • 1,800 km of pipelines in the domestic system • 5 pumping stations • Lines of 14, 20 and 22 inches • Trans-Isthmus pipeline connecting Gulf of Mexico and Pacific Ocean (Pajaritos-Salina Cruz) • In addition, 2,500 tanktrucks are dedicated to domestic LPG transportation • Storage in Mexico includes: • 31 distribution terminals with an overall capacity of 2.5 million bls • 971 privately-owned distribution plants Source: SENER, PEMEX

  28. In 1995, 87% of total demand was covered with domestic production In 2005, this percentage dropped to 77% The deficit in supply has been covered by imports LPG Supply-Demand Balance in Mexico (kbd) D e m a n d 285 297 287 303 328 350 334 338 333 340 321 S u p p l y • Supply AAGR = 1.2% Source: SENER, PEMEX

  29. LPG Imports (Kbd) • Before 1996, Mexico was a net exporter of LPG (with the USGC as the main destination for exports). • AAGR for imports on the 1995-2005 period: 7% • Imports have shrunk because of: • Increase in production • Demand drop 77 94 121 100 102 85 84 73 67 Source: PMI

  30. Logistics for LPG Imports and Exports in Mexico Mexicali Tijuana Hermosillo Ciudad Juarez Imports Exports Pipeline Nogales Piedras Negras Rosarito Nuevo Laredo Arbitrage line Matamoros Topolobampo PEMEX terminals Non-PEMEX terminals Cadereyta Manzanillo Ciudad Madero 2 Abasolo 3 Guadalajara Salamanca Pajaritos 4 7 5 1 6 Cactus Salina Cruz Source: PEMEX, PMI

  31. Mexican Waterborne LPG Imports 2006 Total: 674 kT Source: PMI

  32. Mexican Inland LPG imports 2006 (kbd) Mexicali, 3.3 • All inland imports come from the US • Transportation units that normally cross the USA-Mexico border: • Tanktrucks: 23,000/y • Railcars: 4,500/y • There are 3 pipelines that connect USA-Mexico: • El Paso-Juarez • Laredo-Nuevo Laredo • Brownsville-Matamoros Hermosillo, 0.7 Ciudad Juarez, 20.1 Tijuana, 8.2 Nogales, 2.2 Piedras Negras, 5.0 Nuevo Laredo, 8.5 Matamoros, 7.8 Imports (truck/rail) Exports (truck) Pipeline Cactus Belize: 0.2 Source: PMI

  33. Mexican LPG Supply: Production + Imports • Inland imports are mainly 90% propane and 10% butane While… • Waterborne imports are mainly 100% propane • Typical LPG composition of Mexican mix is 70% propane / 30% butane, this is a result of the blending of domestic production and imports. Source: SENER, PEMEX

  34. Domestic price of LPG in Mexico • The LPG price for first hand sales and the maximum price to the end consumer are regulated by the Ministry of Economics (SE) and the Energy Regulatory Commission (CRE). • There are 145 different price zones in Mexico. • Domestic prices are Mont Belvieu related (as Mont Belvieu is the closest and most important reference market for storage and product supply). Source: SENER, PEMEX

  35. LPG value chain in Mexico Ministry of Economics sets the max. price for end consumers CRE sets first hand sale prices STORAGE SUPPLY DISTRIBUTION CONSUMPTION Domestic production and imports Transportation to terminals Wholesales Terminals Retail sales PEMEX and third parties End users Distributors PEMEX • There are different entities involved in the LPG distribution chain: Source: SENER, PEMEX

  36. LPG Expected Demand Growth in Mexico 2007-2015 • Growth per sector: • Residential, 0.7% • Vehicle fuel, 1.5% • Industrial, 1.9% • Farming and Oil industry, 2.1% • Total AAGR = 1.2% Source: SENER, PEMEX

  37. Expected Change in LPG Demand 314 kbd • The CENTRAL and WEST CENTRAL regions remain as the highest demand areas but … NORTHWEST NORTHEAST • The CENTRAL and WEST CENTRAL regions are the ones with the lower growth rate of all regions… CENTRAL WEST CENTRAL SOUTH-SOUTHEAST Source: SENER, PEMEX

  38. LPG Supply by Gas Plants (kbd) 2005 2015 Source: SENER, PEMEX

  39. LPG Supply by Refineries (kbd) 2005 2015 Source: SENER, PEMEX

  40. LPG supply from gas plants is expected to have an AAGR of 0.8%. LPG supply from refineries will increase at a 5.6% AAGR. The gap between supply and demand will continue to be covered with imports. Expected LPG Balance 2005-2015 (kbd) 319 314 320 327 333 338 341 345 348 353 357 • Supply AAGR = 1.5% Source: SENER, PEMEX

  41. NGL’s Projects

  42. Burgos Project • The Burgos Gas Processing Center started operations in August 2006 • 2 cryogenic plants of 200 mcf each • One condensate stabilization section of 6 kbd • Total capacity: 17 kbd • Storage capacity: 40 kbd for LPG, 25 kbd for naphtha • Truck rack: 6 trucks/hour • Current production: 11.5 kbd of LPG, 9 kbd of natural gasoline, 380 mcf of dry gas Source: Pemex

  43. Fénix Project • Original Fénix Project has been redifined. • PEMEX is focusing on extending already-existing facilities and infrastructure at petrochemical complexes in Veracruz. • The building of a brand-new cracker has not been confirmed. It is unlikely within the next few years. • Alternative plans for Fenix Project may include: • Separation of C5’s from C6+ • Use of C6+ for petrochemical purposes • Potential exports of Pentanes • Potential isomerization of Pentanes • Potential normalization of Pentanes • No official announcement about any Fénix development has been given yet by PEMEX or the Mexican government.

  44. Conclusions

  45. Natural Gasoline and Naphtha Conclusions • Mexico will continue to be a net exporter of Natural Gasoline. USGC will continue to be the main destination. • Natural Gasoline exports may reach over 70 kbd in following years. • Cactus will remain as the most widely available Natural Gasoline stream from Mexico. • Burgos naphtha availability should slowly increase within next few years. Logistics for transportation and marketing may include use of pipelines, trucks, barges and vessels. • Burgos naphtha could become an attractive component for gasoline blending in the U.S. under increased gasoline demand conditions and sulfur restrictions. • Mexico may import less N+A naphtha in coming years due to change in crude slate for domestic petrochemical units.

  46. LPG Conclusions • Mexico will continue to be a net importer of LPG, even with less domestic demand. • Mexico will continue to play a key role as a buyer under the scenario of upcoming new worldwide production. • Waterborne vs. inland imports will vary depending on the economic incentives and strategic projects to attract supply from different sources. • LPG in Mexico will continue to compete against alternative fuels like LNG, natural gas, wood and coal. • Mexico is still the highest LPG per capita consumer in the world and it is expected to import product at least through 2010. • LPG supply is a key social aspect in Mexico. It will continue to be for the coming years.

  47. ¡¡Muchas gracias!!