Into the Void - Refined-Product Delivery and Storage Infrastructure in Mexico, Part 2

U.S. exports of motor gasoline and diesel to Mexico are up 60% from two years ago, and the ongoing liberalization of Mexican energy markets is allowing players other than state-owned Pemex to become involved in motor fuel distribution and retailing there. But there’s a catch. The port, pipeline, rail and storage infrastructure currently in place to receive U.S.-sourced gasoline and diesel and transport it within Mexico is inefficient and stressed. Further, Pemex owns or controls most of these fuel logistics assets and has been slow to make them available to others. Today, we continue our series on efforts to facilitate the transportation of motor fuels to and within the U.S.’s southern neighbor.

In Part 1 of this series, we discussed the fact that the opening up of Mexico’s energy markets to non-Pemex players and competition has been occurring during a trouble-filled period for Pemex’s six refineries. Due to operational and other problems, the refineries’ production of gasoline and diesel is off sharply, and Mexico has been importing more motor fuels from the U.S. and other sources to keep pace with rising demand. In the first 11 months of 2017, U.S. exports of gasoline to Mexico averaged 374 Mb/d, up 58% from 2015, while U.S. exports of diesel south of the border averaged 234 Mb/d, up 65% over the same two-year period. In Southbound, we talked about how energy market liberalization in Mexico has been offering new opportunities for U.S. refiners, midstream companies and motor fuel retailers, among others. For instance, until April 2016, Pemex was the only entity that could import gasoline and diesel to Mexico, and until early 2017, independent/third-party importers could not use Pemex’s refined-product pipeline distribution and storage network.

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Pemex’s network, which includes refined-product pipelines with capacities totaling more than 1 MMb/d and more than 70 storage and distribution terminals with a combined storage capacity of 11 MMbbl — is one of three key elements of Mexico’s existing refined-product logistic infrastructure, the other two being liquids storage assets owned by Mexico’s Comisión Federal de Electricidad (CFE; the state-owned electric utility) and marine terminals, pipes, storage and other assets owned by third parties such as midstreamers, railroads and terminalling companies. (More on these in a moment.) Pemex plays a dominant role in gasoline and diesel logistics within Mexico, and will continue to for a while. (Again, more on this in a sec.)

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