OREANDA-NEWS. November 09, 2016. Mexico's state-run Pemex plans to install a coker at its 320,000 b/d Tula refinery by the end of next year through a tolling agreement, according to the company's five-year plan issued on 4 November.

Tula is one of three Pemex refineries, out of a total of six domestic facilities, which still lacks a coker.

The other two, the 245,000 b/d Salamanca and 330,000 b/d Salina Cruz, should be upgraded in 2017-2018, according to Pemex's plan.

The oil company needs coking capacity to process its increasingly heavy crude production.

A separate project to boost domestic production of ultra-low sulfur diesel is also expected to be completed in all six refineries by the end of 2017, the plan indicates.

According to the original ULSD plan presented in September 2014, 100pc of the diesel sold in Mexico must be ultra-low sulfur by the end of 2017.

Pemex was forced to shelve the costly refinery upgrades in 2015 after the government announced a deep austerity plan, eventually slashing Pemex's budget by some 200bn pesos in two years [2015-2016] and prompting the company to focus on more profitable operations such as exploration and production.

Pemex executives believe they will be able to revive the multi-billion-dollar upgrades through associations with the private sector, but financing has proved difficult to drum up in current oil market conditions.

The plan was issued at a time when Pemex is processing historically low volumes of crude at its refineries, reflecting lower production, maintenance issues and cost-cutting.

Mexico's 2014 groundbreaking energy reform encouraged private-sector investment, but downstream reforms and accompanying regulations are taking longer than expected, sowing a wait-and-see attitude among some investors.

The focus for newcomers appears to be mainly on midstream projects, logistics and products supply, rather than refining because of the proximity of more competitive refineries on the US Gulf coast.

Mexico has yet to release the details of a gradual and regional liberalization of fuel prices and its first oil pipeline open season.

The Pemex plan has gotten a mixed reaction from industry executives. "It raises more questions than answers," one downstream executive told Argus.