WASHINGTON - Mexican President-elect Manuel Lopez Obrador’s campaign promises to overhaul the country’s declining refining sector and reduce reliance on U.S. energy exports were widely dismissed within U.S. energy and political circles as mere political rhetoric.

But two months after his election victory, his advisers are signaling they fully intend to go ahead with that plan, threatening a refining industry along the Texas Gulf Coast that has become increasingly reliant on Mexican gasoline demand. During a recent visit to Mexico City to discuss the North American Free Trade Agreement, Rep. Henry Cuellar, D-Laredo, said he was struck by how forcefully Lopez Obrador’s advisers discussed building the first new refinery in Mexico in decades and rehabbing the country’s existing facilities.

“They’re serious about it,” Cuellar said. “They do want to gradually stop the importation of gasoline.”

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That, of course, would have big implications for Texas Gulf Coast refiners, which account for nearly one-third of the nation’s refining capacity, but increasingly look to foreign markets for growth as U.S. gasoline demand in the United States has flattened with the spread of fuel-efficient vehicles. Over the past decade, the flow of American gasoline to Mexico has almost quadrupled to more than 420,000 barrels a day and accounts for more than half of all U.S. gasoline exports, according to the U.S. Energy Department.

So far, the U.S. refining sector is not expressing any public concern, skeptical not only that Lopez Obrador can pull off his promise, but also that he could do it in a timely manner.

“On a global basis, refineries are almost never finished on time,” Lenny Rodriguez, director of global oil analytics at S&P Global Platts, wrote in a recent note to investors. “Overhauling six refineries that have been neglected for a long time in addition to building 2 new refineries is a tremendous financial (not to mention logistical and administrative) burden that seems too heavy for the Mexican government/PEMEX to bear.”

But not everyone is so sure. Earlier this month, Lopez Obrador announced during a meeting with business leaders in Monterrey that work would begin shortly after he takes office in December on a $8 billion refinery in southeastern Mexico, capable of producing 400,000 barrels of fuel a day, more than any existing Mexican refinery.

David Goldwyn, chairman of the energy advisory group at the Atlantic Council, a Washington think tank, said he believed Lopez Obrador would go ahead, eager to not only create what could be thousands of good paying jobs, but to also show independence from the United States. Lopez Obrador ran on a pledge to stand up to President Donald Trump, who has made Mexico and Mexican immigrants a favorite target of his harsh criticisms via Twitter and other media.

“He has no opposition,” Goldwyn said of Lopez Obrador, whose party also controls the Mexican Congress. “With the tension with the [Trump] administration, they were justifiably weary about being reliant on the United States, and there’s an element of nationalism also.”

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American fuels have filled a gap between supply and demand in Mexico, where decades of delayed maintenance and underinvestment by the state-owned oil company, Petroleos Mexicanos, or Pemex, have steadily undercut production. Gasoline production from Pemex’s six refineries fell to less than 300,000 barrels per day last year, a 43 percent drop from 2007, while gasoline consumption in Mexico rose 8 percent to almost 800,000 barrels per day, according to U.S. and Mexican government statistics.

Dwindling investment and falling oil and fuel production were among the reasons that Mexico, under the current president, Enrique Pena Nieto, reformed the country’s energy markets four years ago, ending Pemex’s 75-year monopoly and inviting new investment from U.S. and other international oil companies. U.S. gasoline imports have in some respects been a boon for Mexico, replacing its own inefficient gasoline production — Mexican’s heavy crude isn’t easily converted into gasoline — with what are some of the world’s most efficient refineries along the Texas and Louisiana Gulf Coast.

If Lopez Obrador replaces that fuel with more expensive Mexican gasoline, it would likely drive up prices at the pump, drawing anger from Mexican motorists, who rioted in early 2017 as prices jumped in the newly deregulated fuel market. Lopez Obrador’s administration could avoid that political land mine by subsidizing gasoline - something that was done in Mexico for decades - but would risk upsetting international creditors and lowering the country’s credit rating, which would raise borrowing costs.

Beyond the potential pit falls, just getting a new refinery built in Mexico is likely to face innumerable obstacles. Lopez Obrador would not the first president to try. Former president Felipe Calderon went so far as to select a site for a new refinery in 2008, but the project never came to fruition, the victim of political fights and the difficulties in securing financing from investors long wary of putting their money into Mexico’s refining sector.

Mexican officials have long run Pemex as a job creator for their citizens, rather than an efficient, profit-driven oil company, meaning a new refinery would inevitably require more employees than its U.S. competitors. Any investor willing to invest in such an enterprise is likely to want the government to give the refinery breaks on costs such as water and oil, said George Baker, a Houston energy consultant and editor of the newsletter Mexico Energy Intelligence.

“They’ve tried to get a new refinery going for 10 years now and what has been accomplished,” he said. “Refineries are such a capital intensive deal with risk on all sides. Even if they can line up the investors, they’re going to want concessions that are going to be hard to sell politically.”

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In truth, Lopez Obrador has a much easier option to ween Mexico from U.S. gasoline than building new refineries. A decade ago, Mexico’s six refineries were producing more than 450,000 barrels of gasoline a day. Were they to get back to that level - Lopez Obrador wants to invest $3 billion to help them do it - that would mean an additional 200,000 barrels of domestic gasoline production per day.

That wouldn’t get Lopez Obrador entirely off U.S. gasoline, but it could cut imports almost in half. That’s not a bad outcome for a president eager to prove Mexico can stand apart from the United States.

james.osborne@chron.com

Twitter: @osborneja