(Bloomberg) -- Fuel that is so dirty that the global shipping industry banned its use last year is being burned at the highest level in three years in Mexican power plants.
With the global shipping industry shunning sulfurous fuel oil to curb emissions, storage tanks in Mexico are overflowing with the stuff, a byproduct of its attempt to produce more gasoline domestically. The solution Mexico has chosen is to push more of it into electricity generation, replacing cleaner-burning natural gas. Consumption of the dirty fuel jumped by almost 50% in the past year to more than a 100,000 barrels a day in March, according to government data.
The capital’s air quality has worsened, said Beatriz Olivera Villa, a consultant with Greenpeace in Mexico, in a phone interview from Mexico City. “It’s an unfortunate setback for the country.”
Replacing natural gas, which it imports from the U.S., with fuel oil is certain to raise Mexico’s emissions. President Andres Manuel Lopez Obrador has pledged to reduce Mexico’s dependence on fuel imports but is faced with highly inefficient refineries. Historically, it’s been cheaper for Mexico to export the crude it produces to countries with more technologically complex refineries and to import refined fuels like gasoline.
State oil company Petroleos Mexicanos produces copious amounts of fuel oil unintentionally because its refineries lack the technology to extract cleaner fuels from the sludge that is leftover during the initial process of turning crude into gasoline. Therefore, the more gasoline the country’s refineries produce, the more extra fuel oil they have to find a home for.
“Mexico is creating a market to absorb the excess fuel oil from its refineries,” said Ixchel Castro, an analyst with Wood Mackenzie Ltd.
Fuel oil is being burned at the six power plants owned by state utility Comision Federal de Electricidad, or CFE. This year, a government commission responsible for monitoring air quality in the metropolitan area of Mexico City, sounded the alarm twice amid high ozone levels. As a result, cement-makers as well as Pemex’s refinery in Tula and its associated power plant, had to reduce activity.
Switching a power plant that uses natural gas to fire a turbine to fuel oil generates 16% more carbon dioxide, according to BloombergNEF calculations.
The air-quality monitoring commission estimates the alarm for high ozone levels may sound 7-20 times this year, forcing industries to curtail activity to curb emissions. That compares with one time last year and six times in 2019. Victor Hugo Paramo Figueroa, head of the commission, said the increased use of fuel oil alone doesn’t necessarily translate into more emissions.
“We have other culprits, including cars and even an eruption of the Popocatépetl volcano,” he said. “And a rainier season can disperse particles more efficiently, keeping the air quality within acceptable levels.”
(Updates with ozone levels and government’s comment in last four paragraphs.)
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