Mexico's state-run oil company Pemex has said it chose the central state of Hidalgo as the site for a new $9 billion refinery after the local government was able to secure land for the construction.

The city of Tula, Hidalgo was chosen in part for its proximity to Mexico City where demand is highest for refined petroleum products, Pemex chief Jesus Reyes Heroles told a news conference.

The government of Hidalgo state had delayed buying up the needed farmland due to the complexity of acquiring rural land in Mexico, where much of the property is communal, but it has since resolved the problems to clear the way for the project.

The new refinery is part of a $12.2 billion plan Pemex has for its two central refineries.

Mexico has grown increasingly reliant on imports of refined products in recent years despite being a major crude oil producer and exporter. Rapidly growing demand has outstripped domestic refining capacity.

Pemex, which operates six refineries with a combined capacity of 1.54 million bpd, imported 341,000 bpd of gasoline last year. As recently as 2004, gasoline imports were only 95,000 bpd.

The new plan will increase Mexico's crude oil processing capacity by 250,000 barrels per day as well as convert much of the low-value fuel oil produced at the existing Tula and Salamanca refineries into high-value products such as gasoline. – Reuters