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UPDATE 2-Mexico to recover investment in Texas refinery in 2-3 years, president says

(Adds details, context and quote from Mexico’s President)

MEXICO CITY, May 26 (Reuters) - Mexico should recover its investment to buy the controlling stake of the Deer Park refinery in Texas during the next two to three years, President Andres Manuel Lopez Obrador said on Wednesday.

Mexican state oil company Petroleos Mexicanos this week announced the purchase of a 50.1%-stake in the 340,000-barrel-per-day refinery from its partner Royal Dutch Shell for some $596 million.

About $106 million of the transaction cost will go towards paying down a January loan to Shell’s unit Shell Oil Company, and up to $490 million towards paying down the joint venture’s debt, Pemex Chief Executive Officer Octavio Romero said in a presentation at a news conference with the president.

Mexico’s government plans to provide cash from its savings to fund the purchase.

Barclays helped to structure the deal, for which negotiations started in August, the president said.

In a report following the announcement, investment firm Tudor, Pickering, Holt & Co estimated the value of oil inventories, which were not included in the $596 million transaction cost, at between $250 million and $350 million at market prices.

Deer Park, which last year worked at 78.5% of its capacity, reported a loss for 2020 as lower fuel demand hit most U.S. refineries’ profits, Romero said.

Romero hailed the transaction that will end a 28-year-long partnership as an important step toward Mexico’s energy self-sufficiency, so that it can stop importing gasoline by 2023.

Lopez Obrador, who has moved to strengthen state control over energy since taking office in 2018, said Mexico would not have to take on new debt to pay for the first ever refinery that Pemex will solely own and operate overseas.

“We were missing 200,000 bpd to reach self-sufficiency. Our options were restarting a refining train at Cangrejera (petrochemical complex) or buying Deer Park,” Lopez Obrador said. “There are no losses.” (Reporting by Stefanie Eschenbacher, Marianna Parraga and Ana Isabel Martinez Editing by Dave Graham and Bernadette Baum)

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