Into the Void - Refined-Product Delivery and Storage Infrastructure in Mexico, Part 3

The opening of Mexico’s refined-products sector to competition after 80 years of Pemex monopoly is spurring the development of new motor fuel-related distribution infrastructure on both sides of the U.S.-Mexico border. A number of these pipelines, rail loading/unloading facilities, storage and other projects aren’t advancing as quickly as their developers may have hoped — replacing the old order with the new is taking time. But the need for new infrastructure is evident. Today, we continue our series on efforts to facilitate the transportation of motor fuels from U.S. refineries to ­­— and within — Mexico, this time focusing on rail-related projects.

This is the third episode of our series. In Part 1, we discussed the points that until April 2016, state-owned Petróleos Mexicanos (Pemex) was the only entity that could import gasoline and diesel to Mexico, and that until early 2017, independent/third-party importers could not use Pemex’s refined-product distribution and storage network. We also noted that competition is being introduced to Mexico’s energy markets 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 10 months of 2017, U.S. exports of gasoline to Mexico averaged 377 Mb/d, up 58% from 2015, while U.S. exports of diesel south of the border averaged 232 Mb/d, up 65% over the same two-year period.

In Part 2, we provided an overview of three key elements of Mexico’s existing refined-product logistic infrastructure. First, there’s 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. Then, we’ve got the liquids storage assets owned by Mexico’s Comisión Federal de Electricidad (CFE), the state-owned electric utility, which over the next few years plans to make available to motor-fuel logistics providers at least one-quarter (and perhaps as much as half) of its 10 MMbbl of fuel storage capacity. (That plan is made possible by CFE’s ongoing build-out of new natural gas-fired power plants and the retirement of older oil-fired plants.) And then there are the marine terminals, pipes, storage and other assets owned by third parties such as midstreamers, railroads and terminalling companies. Finally, we noted that Mexico’s refined-products pipeline system is far from robust, and a lot of motor fuel is transported by rail and by truck.

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