I wonder if there is a deal in the works on oil for amnesty with Mexico.

www.azcentral.com

Refinery planners still talking with Mexico


Ken Alltucker
The Arizona Republic
Sept. 25, 2005 12:00 AM

It would seem to be a perfect time to invest in a new refinery.

With gas prices flirting with the $70-a-barrel mark and the nation's refining capacity strained, refiners are raking in huge profits. Further highlighting the need for more capacity are hurricanes that have battered and disrupted Gulf Coast refinery production this month.

A local group, Arizona Clean Fuels, is seeking to build the nation's first new refinery in three decades. After securing an air-quality permit this spring for a 150,000-barrel-a-day refinery, the group is courting investors to fund the $2.5 billion project, planned at an old citrus grove 40 miles east of Yuma.

Backers of the ambitious project point to a couple of events in recent weeks that brighten prospects for an Arizona refinery.

Mexico President Vicente Fox has pushed for a change in Mexico's laws that would allow foreign investors to tap Mexico's rich oil reserves. Such a change would allow the state oil company, Pemex, to team with private companies to exploit reserves in the Gulf of Mexico and Baja California.

Glenn McGinnis, chief executive of Arizona Clean Fuels, said his group has had ongoing talks with Mexican government officials about securing crude oil from Mexico. The Arizona group would ship refined fuel back to Mexico, which must import gasoline because of a lack of refining capacity.

Fox's proposals "are in direct support of our project," McGinnis said.

Yet Fox's initiatives have encountered opposition from Mexico's Congress, wary of opening up its natural resources, which account for a significant portion of the government's budget.

Another glimmer of hope for the Arizona group comes from a bill introduced recently by Republican Sen. Jon Kyl of Arizona.

McGinnis said Kyl's bill is another incentive for investors who are reluctant to park money in a project that won't begin producing refined gasoline, diesel and jet fuel before 2009.

Kyl's legislation would allow investors to write off the cost of a new refinery the first year the project starts production. The recently passed Energy Bill has a less aggressive timeline, calling for a 50 percent write-off the first year.

"The companies would realize the return on their investment faster," McGinnis said.

McGinnis said his group still doesn't have any signed agreements with investors or refining companies that are willing to partner with the Arizona group.

Some foreign interests have expressed interest in either building or partnering with a U.S. company to build a refinery.