HomeTough questions in Deer Park go unanswered

Tough questions in Deer Park go unanswered

Deer Park – Jay Hackwell, manager of the Shell-operated refinery here, has worked for Royal Dutch Shell for 30 years. He could finish his job at Shell in less than two weeks.

“Effective December 1, I will no longer be an employee of Shell. I will be an employee of Pemex,” he recently told residents and officials of this city of 35,000 people southeast of Houston.

Shell expects to receive regulatory approval by November 29 from the Committee on Foreign Investment in the United States.

Hackwell, an Australian with 30 years with Royal Dutch Shell, provides a good example of the sudden turnaround coming to Deer Park when Shell completes the sale of half its stake in the refinery to partner Petróleos Mexicanos or Pemex, ending more than 27 years as an operator. Hackwell, who was appointed general manager in February, has become the public relations front man for both the seller and potential buyer. The message: The refinery will operate as it always has under the new owner.

In three recent public meetings (one online), Hackwell said that the handover of operations from Shell to Pemex has already begun. He assured residents that the jobs of Shell’s 900 refinery workers were safe and the emergency response team would be transferred to Pemex along with the refinery. “There will be job gains, as new jobs will be created to meet the needs of two companies,” he added.

But Hackwell left many critical questions unanswered, and avoided them when pressed by residents, reporters, and myself:

How realistic would it be to imagine that all the refinery’s production could be sent to Mexico, says Mexico’s president, Andres Manuel Lopez Obrador, who wants it?

What is the evidence that Pemex is qualified to operate the refinery? Pemex was merely an observer of the refinery’s operations at Deer Park. In Mexico, Pemex refineries are operating on average at less than half of their capacity.

The refinery has recorded losses of $360 million this year. What are the expectations for profitability?

Will the American company Pemex built be able to cover the costs of a major security or environmental incident?

Of the new jobs, how many and what kind?

When the time comes to shut down the refinery and environmental processing, who will be financially responsible for expenses that could reach billions of dollars?

Such questions were also raised in Mexico after the flagrant announcement by AMLO in late May. It is frustrating that elected politicians, business leaders, and community activists are not demanding answers to these and other difficult questions before this deal is approved by the Committee on Foreign Investment in the United States and is over. I advise:

Pemex has $110 billion in debt. No financial advisor would advise spending $1 billion to buy a loss-making company offshore with unaccounted-for decommissioning and environmental remediation obligations, and Pemex has made no preparation to manage it in its business plans.

AMLO has a record of hands-on involvement in executive appointments and procurement. Marcos Herreria, Pemex’s No. 2 CEO, is one of the president’s son-in-law. It would be naive to assume that AMLO will not hire its own people for jobs in Deer Park and replace local contractors with its favourites.

AMLO asserts that having Pemex as the full owner of the refinery will increase Mexico’s energy security. Specialists tell me that refineries serve markets with better margins — not countries, and that Deer Park as a dedicated refinery for Mexico makes no economic sense.

deafening silence

I asked the Greater Houston Partnership if it would make a public comment about the proposed Pemex deal in Deer Park, or if not, would it assign me a white paper outlining issues of public interest. As is the case with Rice University’s Baker Institute and University of Houston Law Center. We don’t respond.

In Deer Park, Mayor Jerry Mouton, Jr. assured me that “Shell has been a great partner in the industry,” which means, I suppose, that any party to whom Shell sells its interests will act in the same mind-set as the community. Dr. Brian Babin, a Republican congressman from Deer Park, wrote on June 22 to members of the Committee on Foreign Investment in the United States, objecting to the sale to Pemex, citing safety concerns, but has since remained silent.

The sale of the refinery and the transfer of control over it appears to be going through a bit of scrutiny. You have to wonder why and with what consequences.

George Baker writes on energy issues in Mexico. He is the founding publisher of Mexico Energy Intelligence, an industry newsletter. Tweet embed