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Into the Void - Refined-Product Delivery and Storage Infrastructure in Mexico, Part 4

Mexico continues to open up its refined-products sector to competition, and refinery troubles at government-owned Pemex are providing U.S. refiners and motor-fuel marketers with a golden opportunity to export increasing volumes of gasoline and diesel south of the border. But transporting all those refined products to Mexican population centers and distributing them to thousands of service stations requires port and rail terminals, pipelines and storage, and Pemex has been slow in relinquishing control of its infrastructure. Today, we continue our series on efforts to facilitate the transportation of motor fuels from U.S. refineries to ­­— and within — Mexico, this time looking at more port and rail-related projects and at existing and planned pipelines.

The final numbers for 2017 Pemex motor-fuel production are in, and the news isn’t good — unless, that is, you’re a U.S. refiner exporting gasoline and diesel. Gasoline output at Pemex’s six refineries averaged only 257 Mb/d last year, down 21% from 2016 (and 33% from 2015), and in the fourth quarter of 2017, Pemex’s output averaged a dismal 185 Mb/d. The situation is even worse for diesel: 2017 Pemex production averaged 154 Mb/d, down 29% from the previous year (and 44% from 2015), and in the last three months of 2017, Pemex diesel output fell to 103 Mb/d. U.S. exports have flooded into this void, averaging 377 Mb/d for gasoline and 232 Mb/d for diesel in the first 10 months of 2017, according to the Energy Information Administration (EIA), then spiking in November to all-time records of 655 Mb/d for gasoline and 310 Mb/d for diesel.

This is Part 4 of our series examining the infrastructure that helps deliver Pemex and imported motor fuels to Mexican markets. In Part 1, we discussed the points that until April 2016, 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, which has opened 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 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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