American Oil and Gas Reporter - June 2018 - 76

SpecialReport: Permian Basin Activity

This rendering simulates what the 10,000 barrel a day crude distillation unit at MMEX's
Permian Basin reﬁnery will look like after phase one construction is complete. After
ﬁnishing the second phase, the company says, the facility will be able to produce a full
range of transportation-grade fuels and eventually may expand to a capacity of 100,000
bbl/d.

large-scale refinery," he says.
TCEQ issued a permit for the crude
distillation unit in August 2017, Hanks reviews. Production from the distillation unit
is expected to include 4,000 bbl/d of nontransportation grade diesel used primarily
in drilling fluid, Hanks says. Distillation
unit production also will include an additional 2,900 bbl/d of naphtha for feedstock
in other refineries, and 2,820 bbl/d of atmospheric tower bottoms, a residual fuel
oil that can be used for refining feedstocks
and as marine fuel, he says.
The company already has secured a
five-year contract to sell all distillation
unit diesel production to Pilot Thomas
Logistics, a provider of fuel, lubricants
and chemicals to the energy, marine,
mining and industrial markets and part of
the family of companies that includes Pilot
Flying J truck stops. "It's our understanding
that Pilot Logistics plans to market diesel
to the Permian Basin," Hanks says.
With crude oil production continuing
to climb, especially in the Delaware
Basin, and production selling at a discount
to posted WTI futures prices, MMEX
Resources is unconcerned about the availability of oil feedstock, he says. The
company signed a letter of intent for a
crude gathering agreement a year ago
with EnLink Midstream for as much as
50,000 bbl/d of oil, Hanks says.
"It is very difficult today to build a
76 THE AMERICAN OIL & GAS REPORTER

new refinery anywhere, particularly on
the Texas Gulf Coast," he says. "We
wanted to go to a place where we could
obtain land at a reasonable price for a
site. We wanted to be near a crude supply
and to have rail transportation availability
from West Texas to the Texas Gulf Coast
and western Mexico."
Ready Railways
The availability of a refined product
line from El Paso, Tx., to Phoenix may
provide an additional outlet for refined
products, but the quickest payoff for products from the full-scale refinery will be
realized from rail transportation to western
Mexico, Hanks reasons.
The Texas Pacifico South Orient Railroad transverses the plant site, he points
out. The line, owned by the Texas Department of Transportation but operated
by Grupo Mexico subsidiary Ferromex,
extends east to around San Angelo, Tx.,
and westward to Presidio, Tx., with existing connections to larger rail networks
in both directions.
"We located on that line specifically
so we could move product east and west,
including east into Dallas-Fort Worth or
Temple, Tx., and down to the HoustonPasadena refinery market or on to Corpus
Christi, Tx., or Brownsville, Tx." Hanks
elaborates. "Once the large-scale refinery
is up and going, we will look at western

Mexico because of the interconnection
at Presidio by Ferromex, which has rail
facilities all over Mexico from a connection
across a bridge that has been rebuilt with
funding from Ferromex and the U.S. Department of Transportation."
Typically, transporting by rail is more
expensive than pipeline, but product
pipeline construction to the Texas Gulf
Coast or western Mexico represent a major
expense and significant delay, he says.
"Discount the time and expense of
building pipelines, and rail has a lot of advantages," Hanks considers. "The railroad
transverses our property and, going east,
has access to Burlington Northern Santa
Fe Railroad with connections to HoustonPasadena and elsewhere. It's all there with
no two-or-three-year wait to build a pipeline.
We are doing something very different."
Mexico's Ferromex lines include connections to several ports on the country's
Pacific Coast, he notes, a gateway to
export points.
"But there is also a burgeoning demand
for product in western Mexico in areas
such as Chihuahua City, Torreon and
other places with more access provided
by the deregulation movement in Mexico,"
Hanks says.
Thinking Big
The refining venture is not Hanks'
first, he points out. After graduating from
the University of Texas law school,
Hanks, who also holds an undergraduate
degree in petroleum land management
from UT, worked at Pennzoil in Houston
and later in Washington, representing
companies before the Federal Energy
Regulatory Commission.
In 1986, he launched Maple Resources
Corporation and began acquiring producing properties, including Cabot Corporation's gas processing plants and gathering systems in West Texas, he reviews.
In 1992, Hanks decided to sell the assets
and moved to Peru.
His company there, Maple Peru, acquired a 4,000 bbl/d refinery in Pucallpa,
along with three producing oil fields, and
built the $273 million Aguaytia Project,
which included natural gas production,
processing, pipelines, fractionation and
power generation, Hanks details. After
MMEX was founded in 2010, he says,
the Peru assets were sold.
"Being from West Texas and Dallas,
we started focusing on the U.S. market
again and that led to the idea of building
a green-field refining complex in West

American Oil and Gas Reporter - June 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2018