OREANDA-NEWS. US crude swaps with Mexico could boost supply of lower-sulfur gasoline from Mexican refineries and provide economic and environmental benefits to both countries, the Energy Information Administration (EIA) said.

The Commerce Department earlier this month notified Pemex and a handful of US oil companies seeking to swap crude with Mexico that their applications will be approved. The swaps will likely involve exchanging US light sweet crude from shales such as the Eagle Ford in south Texas for Mexican heavy sour crude.

US Gulf coast refineries are well-suited to process the heavy sour crude as they have significant coking and desulfurization capacity. Conversely, part of the Mexican refinery fleet is configured to run light sweet crude.

In light of these differences between US and Mexican operations, the crude swaps should lead to "better optimization of refineries" within both countries, the EIA said.

In the Mexican refining system, the substitution of Eagle Ford oil for Mexican crudes would free up sulfur removal capacity, which could be re-directed towards converting some of the current higher-sulfur gasoline production into lower-sulfur gasoline.

Any increased supply of lower-sulfur gasoline to Mexico's motor gasoline market, which consumed 761,000 b/d in 2013, would result in reduced sulfur emissions and other environmental benefits, the EIA said.

In 2014, the six refineries operated by Mexico's state-owned Pemex processed 1.2mn b/d of crude, which included 658,000 b/d of Isthmus crude, a medium sour crude, and 497,000 b/d of Maya, a heavy crude blend. Over the past 10 years, Maya crude production has become increasingly heavier, requiring more of the lighter oils to be blended into it to maintain Maya's contractual specifications, the EIA said.

Pemex in January asked the Commerce Department to approve a request to swap 100,000 b/d of US light oil in exchange for Mexican heavy crude.

The refineries that would receive the imported feedstock are the 430,000 b/d Tula in the central state of Hidalgo, the 245,000 b/d Salamanca refinery in the nearby state of Guanajuato, and the 330,000 b/d Salina Cruz refinery on the Pacific coast. Those three refineries currently produce only limited amounts of lower-sulfur products and are not well-configured to process heavy crude, the EIA said.

The swap approvals from the Commerce Department's Bureau of Industry and Security come with certain conditions, including that companies promise not to try to re-export the Mexican crude to other countries. But companies will have the authority to refine that crude and export the refined products.