Mexican demand for U.S.-sourced refined products continues to increase, but Mexico lacks the infrastructure required to efficiently import, store and distribute large volumes of gasoline and diesel. That has spurred the rapid build-out of new port and rail terminals, new pipelines and new storage capacity on both sides of the U.S.-Mexico border. At the same time, Mexico’s state-owned energy companies are gradually opening access to their existing refined-products pipeline and storage networks — which helps a little, but not enough. Today, we discuss the latest round of midstream projects tied to U.S. exports of motor and jet fuels to its southern neighbor.
This blog is an update of our “Into the Void” series on the infrastructure that helps deliver Pemex and imported motor fuels to Mexican markets. In Part 1 of that series, we explained that until April 2016, state-owned Petróleos Mexicános (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, whose output of refined products has been declining — opening the door even wider to imports from the U.S. 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, there are 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. And then there are the marine terminals, pipes, storage and other assets owned by third parties such as midstreamers, railroads and terminaling companies. We emphasized that Mexico’s refined-products pipeline system is far from robust, and a lot of motor fuel is transported by rail and by truck.
In Part 3, we discussed the fact that in 2017 Pemex got off to a slower-than-planned start in auctioning off access to its refined-product pipeline and storage capacity — the Mexican regulator overseeing the auction process is pushing for faster progress this year, but time will tell. Also to be determined is how long it will take CFE (the electric utility) to open up access to a meaningful share of its fuel-storage capacity. In addition, we started reviewing the private-sector infrastructure that helps move U.S.-sourced fuel to Mexican markets, including the all-important rail lines of Kansas City Southern (KCS) and its subsidiary, KCS de México, which serve as de facto product transmission lines for gasoline and diesel deliveries from U.S. refineries in Beaumont/Port Arthur, the Houston area and Corpus Christi to terminals in Mexico. We also discussed 10 rail terminals capable of handling refined products that are either in operation, under construction or being planned along the KCS system in Texas and Mexico. Finally, in Part 4, we looked at a new marine terminal that Infraestructura Energetica Nova (IEnova), a subsidiary of Sempra Energy, is building at the Port of Veracruz, as well as two new rail terminals IEnova is building at inland locations to receive, store and distribute gasoline and diesel to customers in and near Mexico City. We also reviewed existing and planned refined-product pipelines on both sides of the U.S.-Mexico border.