In May 2019, Twin Eagle Liquids Marketing shipped a 100-car train filled with propane from North Dakota to Mexico, marking the first-ever single-commodity train — i.e. “unit train” — between the Bakken and the U.S.’s southern neighbor. As it turns out, it was also the first of what appears to be a regularly scheduled run to Mexico. Since May, three more unit trains have made the journey south from the Bakken’s first unit train terminal for propane. Rail shipments of propane to Mexico as part of mixed-goods trains aren’t new, but figuring out how to economically ship large quantities of propane via unit trains has long evaded NGL marketers and producers — that is, until now. What are the economics and other factors that finally made it possible, and what are the prospects and challenges ahead for unit-train exports to Mexico? Today, we look at how the first all-propane train to Mexico came to pass and what the outlook might be for these shipments to continue.
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Before we get to this latest development in U.S. propane exports to Mexico, it’s worth stepping back for a quick review of what’s transpired in the Mexican propane market in recent years. Mexico has a big appetite for propane, which is widely used there for cooking and water heating. But it has long faced two challenges for meeting its domestic propane demand. The first is stagnant NGL production within the country, and the second is limited pipeline options for transporting propane into and through Mexico. Plus, historically, Mexico’s fuel imports were constrained by its protectionist regulations. As recently as a few years ago, state-owned Petróleos Mexicanos (Pemex) was the only legal LPG importer of record, standing between suppliers and Mexico’s buyers. As we’ve been tracking in the RBN blogosphere, a lot has changed since. In January 2016, Pemex lost its status as the sole seller of propane to Mexican distributors; a year after that, the regulations that had capped Mexican LPG retail prices were eliminated, opening up the LPG market south of the border to U.S. producers and exporters. (See Enciendo Mi Fuego for more of the backstory on Mexico’s changing LPG market.)
The new era of deregulation in Mexico coincided with record U.S. crude oil and NGL production, and the surge in LPGs — particularly propane — has made the U.S. a huge net exporter of the fuel. Buyers eyeing the Mexican market have been active in the Mont Belvieu (TX) spot market, as well as in the Marcellus/Utica and Bakken shales and at Canada’s Edmonton (AB) hub. As shown by the blue line in Figure 1, U.S. exports to Mexico already had started climbing in the early part of this decade, rising from the 50 Mb/d levels seen from 2004 to 2010 to more than 100 Mb/d by 2016. And since then, the U.S. has consistently exported more than 125 Mb/d of propane to Mexico, with peaks near 200 Mb/d in the past couple of years (red oval in Figure 1).
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About the song
"Long Train Runnin'" was written by Doobie Brothers band member Tom Johnston. The song appears as the second track on The Doobie Brothers third studio album, The Captain and Me. The song features Johnston on lead vocals and the rhythm guitar groove that propels the song. Although uncredited on the album, bay area blues harpist Norton Buffalo performed the harmonica solo on the tune. "Long Train Runnin'" evolved out of an instrumental jam tune the band had been performing live called "Osborn." As they were going through song ideas for their third album, producer Ted Templeman liked the groove on it and persuaded Johnston to come up with words and a melody for it. It was released as the first single from the album in March 1973, and went to #8 on the Billboard Hot 100 chart.
The Captain and Me was recorded at Warner Bros. Studios in North Hollywood between late 1972 and early 1973, with Ted Templeman manning production duties. It was released in March 1973, and went to #7 on the Billboard Top 200 Albums chart. Two singles that hit the top 20 were released from the album. Personnel on the record were: Tom Johnston (vocals, guitar, synthesizer, harmonica), Pat Simmons (vocals, guitar, synthesizer), Tiran Porter (bass, backing vocals), John Hartman (drums, backing vocals), and Michael Hossack (drums, congas, cymbals, timbales).
The Doobie Brothers are an American rock band formed in San Jose, CA, in 1970. They have been active for nearly five decades, with 29 different touring and recording members passing through its ranks during that time. The Doobie Brothers were featured on the debut of Don Kirshner's Rock Concert show in 1973. They have released 14 studio albums, five live albums, nine compilation albums, and 36 singles to date. They have won two Grammy Awards and were inducted into the Vocal Group Hall of Fame in 2004. The Doobie Brothers still record and tour to this date. The band, featuring long-time members Tom Johnston, Pat Simmons, and John McFee, are on tour with Santana through September. They are assisted on the road with five additional touring members, including Bill Payne (Little Feat) on keyboards.
