OPIS (Oil Price Information Service) by IHS Markit is the first price reporting agency to calculate implied wholesale gasoline and diesel rack costs in the Mexican fuel market. Offering 2 new price discovery options, you'll be able to get unprecedented price transparency in Mexico's changing fuel markets. 

The OPIS Mexico Fuels Report features landed spot fuel market index and critical news analysis and OPIS Mexico Racks provides retail, implied and posted wholesale pricing in the developing Mexican gas and diesel market with daily rack prices at all terminals in Mexico. 

Rely on OPIS for accurate and transparent price discovery necessary to seize opportunities and tackle challenges across the border. Read on for the latest news....


New Terminals Allow KCS to Export 135% More Fuel Into Mexico in 2019

January 21, 2020

MEXICO CITY -- Kansas City Southern (KCS) fuel imports grew 135% in 2019, benefiting from the entrance in operation of new fuel storage capacity in rail terminals across the country.

The railroad moved 40 million bbl of refined products last year, company data reveals. Of this volume, 52% was gasoline, 30% diesel and the remaining was LPG.

Gasoline shipments registered the biggest annual increase. KCS moved 21.5 million bbl of gasoline in 2019, an increase of 90% compared with the previous year.

During the last quarter of 2019, KCS moved 41,400 carloads of refined products into Mexico, almost twice the volume moved during the previous quarter and nearly 7,000 cars more compared with the same period in 2018.

KCS imports benefited from the entrance in operation of TMM's 300,000-bbl San Luis Potosi storage facility, the completion of a 120,000-bbl new phase at Grupo Simsa's 650,000-bbl San Jose Iturbide terminal.

Bulkmatic didn't immediately respond to an OPIS request to confirm if it began operating its first 360,000-bbl phase at its Salinas Victoria terminal in the greater Monterrey area. The company previously said it was scheduled to come on line in September.

The railroad has previously said that the entrance in operation of new storage facilities would expedite and increase the efficiency of its logistic services compared with transload operations.

The construction of an additional 100,000 bbl of storage capacity at TMM's San Luis Potosi in the first quarter of 2020 will allow the company to continue increasing its import capabilities. KCSM is a partner in the project.

According to a KCS investment presentation, the construction of Avant Energy and Savage's SUPERA network is expected to be completed by the last quarter of 2020.

The SUPERA network is composed of a 1.2-million-bbl facility at the Port of Altamira and a 750,000-bbl unit train storage facility in Queretaro.

In recent years, rail shipments have become a viable option for Pemex and private companies to import fuel into Mexico amid the country's current infrastructure bottlenecks.

OPIS estimates the cost to ship gasoline into Monterrey from Houston with a manifest rail delivery is U.S. 22.76cts/gal, from Corpus Christi to San Jose Iturbide U.S. 24.81cts/gal, and U.S. 29.81cts/gall from Houston to San Luis Potosi.

This assessment includes the rental cost of a tank car and KCS' fuel surcharge rate for January. According to market sources, delivering fuel in a unit train can be 30%-50% cheaper compared with a manifest delivery.

According to PIERS Enterprise by IHS Markit data, companies imported a combined 31.1 million bbl of gasoline and diesel into Mexico, year to November, based on customs reports. Railed gasoline and diesel averaged 95,000 b/d in November, 11.5% of all imports that month.

OPIS is a subsidiary of IHS Markit.

ExxonMobil was the largest importer of railed gasoline and diesel into Mexico, importing 10.9 million bbl year to November, followed by Pemex with 8.3 million bbl and Windstar Energy with 4.8 million bbl.

 

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service


China Increases 2020 Gasoline Export Quotas; Mexico Could Benefit

December 31, 2019

OPIS Asia reports that China has issued its first batch of oil product export quotas for 2020 that amounts to over 50% more than last year in a clear nod tothe nation's growing refining capacity that points to intense competition in the new year, industry sources said.

Authorities allocated 28 million mt (176 million bbl) in their first batch, which is a 52.54% increase from the 18.355 million mt (115 million bbl) set aside in the first tranche of last year, according to government notices.

Mexico could benefit from increased Chinese export quotas as Pemex has implemented a diversification strategy to reduce its dependency on fuel imports from the U.S., cutting fuel purchases from American refiners to new low levels.

The state-owned company imported into Mexico 326,000 b/d of US gasoline in September, according to data by the Mexican government. This is the lowest level recorded since data starts in 2016.

Year to October, Chinese fuel exports to Mexico have increased significantly to become Mexico's second main gasoline supplier. Pemex imported 41,150 b/d of gasoline from the Asian giant in the third quarter of the year. Pemex lands Chinese gasoline imports into northwestern Mexico, PIERS Enterprise by IHS Markit data shows.

According to IHS Markit data, China exported 48,600 b/d of gasoline in Q3 to Latin America, which is about 12.2% of its total 397,000 b/d exports during the period.

IHS Markit is the parent company of OPIS.

Similarly, Pemex has also ramped up imports from South Korea, bringing 19,200 b/d of gasoline in Q3 from the country. Pemex has in place a crude for refined products swaps with South Korean refiners. Although, it is unclear if similar agreements are in place with Chinese companies.

China exported 199,666 b/d of gasoline to Indonesia and 41,333 b/d to Malaysia in Q3. However, IHS Markit expects Chinese companies to seek new clients for its product amid the start-up of new refining capacity in southeast Asia.

In total, China issued export quotas in three batches totaling 48.145 million mt (302 million bbl) last year for general use and 7.85 million mt (49.3 million bbl) under tolling deals.

One source called the increase "quite scary," noting that "the crude import quotas are also up so (refinery) runs will go up and exports will grow again."

Theindustry analyst added that refiners in Taiwan and South Korea that target the same overseas markets will be most affected by this move.

Typically following the issuance of the oil product export quota, the government would break it down to the three products, i.e., gasoline, jet fuel and gasoil, but it has so far not done so. For now, the usual players have been given permits to ship products overseas from Jan. 1, 2020.

The allocations are: Sinopec 13.36 million mt (84 million bbl), PetroChina 9.2 million mt (57.8 million bbl), Sinochem 2.79 million mt (17.6 million bbl), CNOOC 2.5 million mt (15.7 million bbl) and CNAF 60,000 mt (377,388 bbl).

The government has yet to allocate export quotas to independent refiners, even those that have already brought onstream highly sophisticated plants that are geared to produce transportation fuels and petrochemical feedstocks.

The explosion of Chinese refining capacity began in the last quarter as the first of several refineries reached full commercial rates earlier this month with at least two other similar world-scale plants due to make the leap next year.

The first of these mega-refineries to crank up its secondary units and reach its full 200,000-b/d capacity was Hengli Petrochemical. Next in line is Zhejiang Petroleum & Chemical Co. Ltd. (ZPC), which this month started its second crude distillation unit (CDU), well ahead of market expectations, the sources said. ZPC has two 200,000-b/d CDUs and numerous secondary units to process medium-sour crudes. The combined run rates of the two crude units have risen to average 60%-70% of capacity, sources said earlier.

Sinopec on its part is due to bring onstream its new 200,000-b/d Zhanjiang refinery early next year after completing construction this month.

Both independent refiners, Hengli and ZPC, have signed term supply contracts with Saudi Aramco to ensure secure feedstock. Aramco agreed to supply 116,000 b/d of crude to ZPC in 2019 under a term contract. It is also taking a 9% stake in the refiner in an effort to extend Aramco's value chain in China's refining and petrochemical sector.

Aramco agreed to supply Hengli 130,000 b/d this year. China's independent refiners were given the first batch of quotas to import 103.83 million mt of crude oil next year. That's an increase of 8% from a year ago, with the bulk of the extra volumes going to companies such as Hengli and ZPC.

 

--OPIS Asia staff report

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service

 


Mexico's Fuel Supply Stable During High-Demand Season Amid Challenges

December 24, 2019

MEXICO CITY/WASHINGTON D.C.--Mexico's fuel supply has remained stable despite weather, refinery maintenance, and pipeline shutdown challenges during December's high-demand season.

ONEXPO, Mexico's largest retail association, told OPIS that no fuel supply disruptions had been reported so far in December.

It is unlikely Mexico suffers fuel shortages during this year-end holiday season, Rosanety Barrios, an independent Mexico City-based energy analyst, told OPIS.

"Pemex's logistics system has weak points that become evident during the holiday's period at the end of the year," Barrio said.

However, President Andres Manuel Lopez Obrador's administration underwent a learning curve with the fuel shortages experienced earlier this year as it closed pipelines to fight fuel theft.

"The golden rule that no fuel shortages can happen was learned," she added.

Pemex has built-up fuel inventories and scheduled waterborne and rail deliveries well in advance to this high-demand season, Barrios said.

Yet, market participants have to monitor the peak demand registered during early January, said Barrios, who is a former director for fuel markets at Mexico's Energy Secretariat (SENER).

"If December demand was higher than expected, inventories usually run by January, stressing the supply system as people return to work from the holiday," she added.

Bad Weather Limits Port Operations

According to Pemex's meteorological reports, the ports of Tuxpan and Pajaritos have operated irregularly during December due to bad weather, leaving dozens of tankers waiting to offload product.

Tankers have piled up outside the main ports in east coast Mexico over the past few days, with some as many as 15 days, as bad weather caused port operations to cease because of unsafe conditions, vessel-tracking platform MINT by IHS Markit shows.

As of Tuesday morning, there were 35 tankers anchored outside the Ports of Tuxpan and Pajaritos waiting to discharge cargoes. The tankers combined represent roughly 10.2 million bbl of cargoes.

On Dec. 19, OPIS reported 23 tankers were waiting to offload outside both ports. A source close to Pemex told OPIS that at least 12 of those vessels were carrying gasoline.

IHS Markit is the parent company of OPIS.

Lack of timely data difficult analysis

Currently, Mexico doesn't have timely data on its inventories, demand, or refinery output to analyze its fuel supply balance.

During the first week of December, Mexico had 8.1 million bbl of gasoline in storage, nearly 2 million bbl more than in the previous year, government data show.

Under its Public Policy on Minimum Fuel Inventories, SENER should report every week the country's inventory levels.

Pemex refineries have been undergoing major maintenance work in December, increasing the country's reliance on imports during this high-demand season.

During the first week of December, Pemex's six refineries produced a combined 219,000 b/d of gasoline. At the same time, Mexico imported a total of 700,000 b/d of gasoline.

On Dec. 8, Mexico's energy secretary, Rocio Nahle, disclosed that Pemex was doing major maintenance work at its refinery. Works included a fluid catalytic cracking unit and a gasoline reformer at its 330,000-b/d Salina Cruz, a whole refining train at the 315,000-b/d Tula, and auxiliary units at the 220,000-b/d Salamanca refinery.

Tuxpan-Tula Pipeline Operates Irregularly

Imports at the Port of Tuxpan could have also been affected by the irregular operation of the 173,000-b/d Tuxpan-Tula pipeline.

The pipeline has suspended operations 13 times between Dec. 1-24 amid illegal tapings, government reports show.

The pipeline moves fuel offloaded at the Tuxpan Port into Tula, where it is distributed to Mexico City and the Bajio region via pipeline.

Sources have told OPIS that disruptions at the Tuxpan-Tula pipeline operating also delays the offload of ships at the Port of Tuxpan.

 

--Daniel Rodriguez, Daniel.rodriguez@opisnet.com

--Eric Wieser, eric.wieser@ihsmarkit.com

Copyright, Oil Price Information Service


Uncertainty Grips Mexico After Pemex's Fuel Price Regulation Scrapped

December 17, 2019

Mexico's fuel market has fallen into uncertainty as the country's energy regulator suspended the asymmetric regulation overseeing Pemex's fuel prices.

The Energy Regulatory Commission (CRE) voted late Monday on lifting Agreement A/057/2018, which dictated Pemex's price methodology and discount system.

The regulator didn't explain the reasons behind this measure nor disclosed any norm to replace the suspended agreement.

It is unclear if the preceding regulation, RES/2508/2017, will take place as the agreement (A/57) modifying it was lifted or if a regulatory vacuum will take place to benefit Pemex, multiple sources told OPIS.

Uncertainty has taken over the sector as it awaits CRE to publish the final resolution lifting the agreement in the Government Official Gazette (DOF), a fuel marketer importing fuel into Mexico told OPIS.

CRE approved A/57 in December 2018 shortly after Andrés Manuel López Obrador became president. The agreement sought to limit Pemex's powers as the preceding RES/2508 lacked transparency.

Res/2508 allowed Pemex's price formulas to have a negative K factor, which is set by the company to accommodate for market conditions. With a negative K factor, Pemex could set prices under the international price benchmarks.

Also, Res/2508 didn't dictate how Pemex should allocate discounts received by U.S. refiners on Renewable Volume Obligation (RVO), an U.S. mandate for the fuel sector to include a percentage of biofuels in refined products sold domestically.

A/57 obligated Pemex to give all end-users an 80% discount on the RVO price and put a floor to the K factor of zero.

According to an analysis by Mexico's Anti-Trust Agency (COFECE), the issues related to the K factor and the RVO discounts in RES/2018 could have given Pemex powers to undermine competition.

"If we return to Res/2508, Pemex is obligated to continue publishing its rack prices, and discount program and the market impact will be limited to the negative K factor and RVO discounts," the fuel marketer said.

"However, if this creates a regulatory lagoon, if this is the begging of the end of Pemex's asymmetric regulation, this will be a demotivating game changer for private participation in Mexico," the marketer said.

A source close to Pemex said that the law dictates that Res/2508 should kick in again after the lifting of the modifying agreement. However, this will be defined once the resolution lifting the A/57 is published.

"It is unlikely Pemex will stop publishing its fuel prices. Although, they will be less transparent," the Pemex source said. "What CRE approved yesterday doesn't mean that Pemex is free to set its own prices."

The obligation CRE gave Pemex of providing an 80% discount on the RVO to all end-users was terrible, the source close to Pemex said.

This is as fuel imported from Asia don't have RVO and fuel purchased at cross-border racks in the U.S. don't give an RVO discount, the source close to Pemex added.

The operator of one of Mexico's only five private terminals said the lifting of A/57 is pointless as Pemex's price formula was still obscure and unaligned with international markets.

"We were already submerged in uncertainty on how the Pemex's price formula works," the operator said.

According to an OPIS analysis comparing Pemex's gasoline prices in racks at East Coast, Mexico, such as Progreso, Veracruz, and Madero and USGC spot fuel prices, have a negative correlation of -0.215.

The correlation between USGC spot gasoline prices and Pemex's rack terminals in Veracruz, Progreso, and Madero was -0.215 in October, an OPIS analysis shows.

When USGC spot gasoline prices rose to peso 8.61/liter from peso 8.36/liter over Oct 2-11, Pemex's fuel prices fell to Peso 11.93/liter from 12.61/liter.

A former CRE commissioner told OPIS that the lifting of the agreement is a negative signal for the market, but its impact will be limited.

"Pemex will continue losing clients because its capacity to provide price discounts is limited by its inefficiency and by how many resources it is willing to lose to maintain customers," the former CRE commissioner said.

Also, fuel distributors and retailers will leave Pemex due to the concerns they have with the reliability of the company's fuel supply, the former commissioner added.

Pemex's financial strains will prevent it from maintaining a leading position in the Mexican fuel market, Alejandra Leon, IHS Markit energy analysis director in Mexico, told OPIS.

"Mexico doesn't have a competitive market due to the lack of infrastructure, which prevents more companies from participating," Leon said.

IHS Markit is the parent company of OPIS.

However, once new private terminals come online in 2020 and 2021, Pemex will begin losing its market dominance as competitors will have access to infrastructure to import and distribute fuel, she added.

Despite the uncertainties brought by the lifting of the Agreement A/57, the Mexican fuel market remains an attractive place to invest in the long term, especially considering the decrease in fuel demand in the U.S. amid the energy transition, Leon said.

The agreement A/57 was set to be lifted once Pemex lost over 30% of the market share in the gasoline and diesel market nationwide, something that hasn't happened yet.

Government data shows Pemex sold 688,500 b/d of gasoline in September, 89% of Mexico's total demand. As well, the state-owned company sold 270,300 b/d of diesel during the same month, 79% of the country's total demand.

Pemex has lost market share, especially in border states with the U.S. where companies can bring fuel easily into the country by rail and truck.

In the northwestern region, Pemex wholesale diesel sales have fallen 40.2% since Mexico began allowing private imports in 2017, 25% in the northern region and 29% in the northwestern region.

The company maintains a solid position in the gasoline market as its wholesale sales have fallen 16% in the northwestern region, the biggest drop of any area in the country.

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service


Companies: Lack of Guidelines in Mexico's Strategic Inventory Ticket System

December 13, 2019

MEXICO CITY -- Market participants are concerned with the ticket system in Mexico's Public Policy of Minimum Fuel Inventories (PPMFI), feedback provided by companies during the policy's public consultation period shows.

As a way to fulfill the PPMFI inventory requirements, the policy allows companies to acquire tickets for the financial rights to fuel stocks held by third parties.

Companies worry the lack of guidelines could turn tickets into an entry barrier for new players and allow fraudulent transactions to occur.

Last week, Mexico's Energy Secretariat (SENER) published modifications to the country's PPMFI, with market sources saying that those changes disregarded feedback from over two dozen stakeholders supplied via the National Regulatory Enhancement Commission (CONAMER).

The modifications postponed the implementation of the policy until July 2020.

Also, it cut inventory requirements from 2020 to 2024 to five days demand from an incremental goal of 11 and 13 days of demand by the end of the period.

Beyond Pemex, there are only five other private storage terminals currently operating in Mexico. These are Grupo SIMSA's San Jose Iturbide, Vopak's San Juan Ulua, Hidrosur's Progreso, Glencore's Dos Bocas and TFCM's San Luis Potosi. Pemex has expressed previously that it doesn't have excess storage capacity to be able to offer tickets to third parties.

Tickets as Barrier to Entry for Small Players

The ticket system could become an entry barrier for smaller players in the Mexican market, Alejandro Motufar Helu, director of Mexico City-based consultancy Petro Intelligence, told OPIS.

"There is the possibility that tickets will be offered at an overprice with the end of undermining competition," Motufar Helu said.

"Also, there is the scenario that major marketers don't want to emit tickets to other smaller players," he added.

These concerns were also shared by Mexico City-based consultancy group ENIX during the CONAMER public consultation to the modifications.

Competition could be affected by lack of clear guidelines on the ticket system, "as ticket holders could exercise quasi-monopolistic powers on their price and assignment criteria," ENIX said.

During the public consultation, Chevron said due to the lack of Mexico's storage infrastructure, the ticket market would be imperfect, unbalanced and artificial.

"As the Mexican fuel storage market is under development, it doesn't have the elements necessaries for (tickets) to become a viable alternative," Chevron said.

These circumstances could lead to diverse behaviors "contrary to an efficient and competitive market including anticompetitive practices," Chevron added.

This is an opinion was shared by Marathon Petroleum Corporation (MPC) during the public consultation, saying that the lack of storage capacity in Mexico in 2020 could lead to a practical oligopoly.

The PPMFI doesn't have operational guidelines for the ticket market. Without defined offer and acquisition parameters, non-discriminatory access to tickets cannot be guaranteed, Chevron added.

Lack of Rules Could Lead to Fraud

The ticket system requires a transparent emission, transference, commercial, competitive, and non-discriminatory system, MPC said during the policy's public consultation.

"Any system without clear enforcement rules, without adequate traceability and validation could result in a low transparent, corrupt and fraudulent (ticket) mechanism," MPC said.

Marathon said fraudulent ticket transactions could occur in Mexico without clear oversight such as those that occurred in the U.S. with Renewable Volume Obligations (RVO) between 2013 and 2018.

"The lack of clear rules will generate uncertainty, difficult supervision, unjustified penalties," MPC added.

Financial instruments such as tickets are highly specialized instruments and are usually supervised by institutions such as Mexico's National Banking and Derivative Commission, MPC added.

Mexico also must regulate tickets to confirm their validity. Mexico's Energy Regulatory Commission (CRE) could certify inventory tickets like it does with Clean Energy Certificates (CELs), although this could create an administrative burden, Petro Intelligence's Motufar Helu said.

"There is a concern than in a secondary market some agents could falsify coupons and try to sell them," he added.

Potential Solutions to Ticket Concerns

Various stakeholders, including Chevron and MPC, said ticket concerns could be solved by reinstating a previous exception to the PPMFI for companies developing infrastructure that was scrapped by the modifications introduced last week.

The scratched exemption allowed marketers that signed offtake contracts before the end of June 2019 with new terminals to be excluded from having minimum fuel inventories by 2021 if force majeure problems delay the entrance in operation of these projects.

Mexico requires a clear transition mechanism for the PPMFI as new infrastructure is built such as the scratched exemption, Alejandra Leon, IHS Markit energy analysis director in Mexico, told OPIS.

IHS Markit believes there will be an excess of storage capacity in the long-term due to the number of private projects under construction.

If all proposed storage projects in Mexico were built, the country would triple its storage capacity to over 65 million bbl, Leon said.

"The change in the inventory requirements is pressuring the viability of many of these projects," Leon said.

IHS Markit is the parent company of OPIS.

Petro Intelligence's Motufar Helu also considered a solution to ticket concerns is for small marketers or brokers that sell under a set volume of fuel to be exempted from the rule.

"These players will be buying fuel from larger marketers that will probably be fulling inventory requirements," he added.

Marathon Petroleum declined to give further comments to OPIS on the matter. Chevron didn't respond to comment requests.

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service



Pemex Boosts Gasoline Imports by 30% in October Amid Refining Challenges

December 4, 2019

Pemex boosted fuel imports in October as its refinery run rates fell meanwhile private companies imported over 100,000 b/d of gasoline for the first time ever, Mexico's Energy Secretariat (SENER) data reveals.

Pemex imported in October 555,160 b/d of gasoline compared with 423,333 b/d in September, which is the company's lowest reported levels of import in 2019, SENER data shows.

From Sept. 30 to Nov. 3, Pemex's overall refining utilization rate was 32% down from 41.1% during the previous four weeks, SENER data shows.

As a result, Pemex produced 182,200 b/d during October, down by nearly 37,000 b/d compared with September, SENER data shows.

Pemex had issues with its 275,000-b/d Minatitlan and 220,000-b/d Salamanca refineries during October, Kent Williamson, IHS Markit director, refining and marketing, Latin America, told OPIS. IHS Markit is the parent company of OPIS.

"Pemex continues to struggle with its refineries. It seems they were gaining momentum in the summer, but they had problems in October," Williamson said.

Salamanca was one of the refineries expected to undergo maintenance during the second half of the year, Williamson said. However, it is unclear if Salamanca's recent drop in refining levels was due to maintenance work or operational challenges, he added.

Salamanca has experienced step decreases since August after operating steadily at a 60% utilization rate over the first half of 2019, Williamson said.

Pemex's overall utilization fell from 44% by the end of September to 26% by mid-October, and it recovered to 35% during the first week of November, Williamson said. "It is unclear if Pemex refineries are struggling or have decreased runs due to planned maintenance," he added.

IHS Markit forecasts incremental improvements at Pemex refineries for the next year, stabilizing at 40%, Williamson said. "We have a steady increase but not the 900,000 b/d (Energy Secretary Roció) Nahle said Pemex would reach by the end of the year," Williamson said.

During the first week of November, Mexico's gasoline inventories reached 5.8 million bbl, 1.67 million bbl more than the same period a year ago.

However, gasoline stocks were down by almost 1 million bbl compared with the numbers SENER reported for the first week of September.

Private Companies Gain Terrain

According to SENER, private companies imported 101,800 b/d of gasoline during October, a new high record. This is 18,000 b/d more than the level of the previous month and three times the levels reported for a year ago.

Private gasoline imports grew thanks to ExxonMobil and Glencore, the two largest importers after Pemex, according to data by PIERS Enterprise by IHS Markit.

According to PIERS, ExxonMobil imported 27,000 b/d of gasoline during October, 7,000 b/d more than the previous month.

Glencore imported 18,000 b/d of gasoline during October, which is 6,400 b/d more than in September, PIERS data shows.

Glencore surpassed Marathon Petroleum to become Mexico's second-largest gasoline private importer, according to PIERS. The U.S. refiner imported 15,700 b/d of gasoline in October into Mexico.

Glencore introduced all imports via its marine terminal at the Port of Dos Bocas, Tabasco, in southern Mexico, PIERS data shows.

Meanwhile, ExxonMobil has worked in partnership with KCSM to ship fuel using unit trains across the Western, Central and northern Mexico.

Marathon offloaded over 12,000 b/d of gasoline at Mexico's northwestern ports of Ensenada, Mazatlan, Topolobampo, Guaymas and La Paz, where it acquired storage capacity from Pemex at its logistic open seasons.

Compared with a year ago, ExxonMobil grew its gasoline imports into Mexico by 108%. Meanwhile, Glencore in October 2018 reported no gasoline imports despite inaugurating its Dos Bocas marine terminal in August of that year.

Mexico's Windstar Energy and Novum Energy have increased their gasoline imports into Mexico significantly year over year.

In October 2019, Windstar imported 11,200 b/d of gasoline and Novum imported 5,900 b/d. Compared with a year ago, they grew imports by 133% and 390%, respectively.

As new terminals have come online, private imports have increased. "Over the last year, companies are also becoming more efficient and streamlining their operations as time pass," Williamson said.

 

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service

 


Shell to Begin Waterborne Fuel Imports in Mexico in H2 2020: Executive

November 11, 2019

MEXICO CITY -- Shell expects in the second half of 2020 to begin waterborne fuel deliveries in Mexico via the Port of Tuxpan in the country's east coast, a company executive told OPIS.

The company will move product into Tula in Central Mexico via this new position in Tuxpan, said Murray Fonseca, Shell Mexico's downstream lead.

"How much fuel we import will depend on demand, our number of service stations, and our future terminal capacity," Murray said in an interview.

The company began its first fuel imports into Mexico in September, bringing 66,000 bbl (2,200 b/d) of diesel as well as regular and premium gasoline into San Jose Iturbide, Guanajuato.

"That first train shipment was a historical moment for Shell as it was our first fuel import into Mexico," Murray said.

The company expects to import two unit trains per month, he added. A unit train can carry from 50,000 to 100,000 bbl.

"We will see a ramp-up in imports over the coming months," said Fonseca, whose company is moving fuel from Houston using Kansas City Southern's rail network.

A Spot Bajio Fuel Market?

When asked if a spot market could emerge in Mexico's west-central region, Fonseca answered there is a possibility, but it will depend on many factors.

"In the end, all this would be speculation," he added.

In addition to Shell, majors Total, ExxonMobil and Valero are moving product into the west-central region, also known as Bajio.

Fonseca said that private fuel imports would accelerate next year once the new infrastructure is completed. "Companies are looking at opportunities to improve Mexico's logistic system," he added.

"We can play with swaps and tickets. This will happen in the medium term, but first, the infrastructure has to be completed," Fonseca said.

According to data from Mexico's Energy Regulatory Commission (CRE), there are 38 terminal projects under construction with a combined 26-million-bbl in storage capacity.

Rail to Remain Critical for Bajio

Once new terminals come online, the methods of transportation to move product into Mexico will diversify, Fonseca said.

Railway will play a role in supplying products into Mexico in the medium-term as marine terminals and, eventually, pipelines are developed. "Today, the options to import fuel are limited," Fonseca said.

"However, at Bajio, it will be more efficient to bring product via rail rather than trucking it from marine terminals," he added.

Moving production in truck beyond a 200-km radius from marine terminals becomes very inefficient, Fonseca said.

According to PIERS by IHS Markit, private companies imported 2 million bbl of gasoline and diesel into Mexico in September using trains, which is 9% of all fuel imports.

Private companies also imported 1.4 million bbl of fuel using marine vessels and 1.1 million bbl using trucks in September, PIERS shows. This is 11.5% of all fuel imports.

The Rules of the Game Continue

Fonseca sees fuel market liberalization continuing under President Andres Manuel Lopez Obrador. "The foundations, the games of the rules continue in Mexico," he said.

The executive said that Lopez Obrador's administration is introducing general policy and regulatory changes to Mexico's fuel market, but none are significant concerns.

"For me, there haven't been any concern signs," Fonseca said.

When asked about recent changes to Pemex's bulk discount program and its plan to create and operate a new network of retail stations, Fonseca said he welcomed initiatives from competitors as long as they  "create healthy and loyal competition."

Economic Stagnation Hit Fuel Demand

Mexico will probably end the year with a slight decrease in fuel demand amid the economic stagnation the country is experiencing, Fonseca said.

"Due to the fuel supply problems in January ... the demand profile for this year is a bit unusual," he added.

According to the country's National Statistical Institute (INEGI), Mexico's GDP did not grow during the first months of 2019.

Going forward, Shell expects fuel demand in Mexico to continue growing over the next five years along with its middle class, car-ownership rate and income levels.

--Daniel Rodriguez, daniel.rodriguez@ihsmarkit.com

Copyright, Oil Price Information Service


Mexico Restarted US Crude Oil Imports in July: EIA

October 8, 2019

MEXICO CITY -- Mexico imported 500,000 bbl (17,000 b/d) of crude oil in July, the first time since President Andres Manuel Lopez Obrador took power in December, data from the U.S. Energy Information Administration revealed on Tuesday.

Pemex imported 11,000 b/d in October and 23,000 b/d in November of U.S. Bakken leigh shale crude oil from Phillips 66, the first time the company has done so in recent years.

The restart of light crude oil imports could significantly help Pemex increase its refinery utilization rates at three of its refineries, which have a single configuration, preventing them from efficiently processing Mexico's heavy Maya crude oil blend.

These three facilities, 330,000-b/d Salina Cruz, 315,000-b/d Tula and 220,000-b/d Salamanca refineries, produced over 120,000 b/d of fuel oil in August, representing a 35% residual yield, the company's institutional database (BDI) reveals.

Amid a decade-long decrease in output, Pemex's availability of light crude oil has fallen significantly, affecting its single configuration refineries.

Pemex produced 607,000 b/d of light and super light crude oil in August, down from 1.03 million b/d three years ago, the company's DBI reveals.

According to a study from the previous administration of President Enrique Peña Nieto, by only processing light crude, Tula would cut its fuel oil yield by half to 15% compared with processing a blend with 20% Maya heavy crude.

if Tula had only processed light crude oil in 2014, it would have doubled its variable refining margin to $8/bbl, according to the study.

By running a light crude low in sulfur such as the Louisiana Sweet or the Shale Bakken, Pemex would cut its high-sulfur fuel oil output. This would protect the company's refining variable margin of marine fuel specification changes to be implemented in 2020 by the International Maritime Organization (IMO).

Pemex has no funds in place to import crude at its proposed 2020 budget.

However, the company could implement swaps to increase the availability of light oil in its refineries.

Lopez Obrador previously criticized the strategy from his predecessor President Enrique Peña Nieto's administration of importing light crude to boost Pemex's refining margins.

The president said via Twitter in October 2018 that Pemex's light crude imports were additional "proof of the great failure the neoliberal policy... had over the last 30 years."

However, Lopez Obrador changed his rhetoric in January, saying that his administration is assessing importing light crude to process at Pemex's refineries when it was more profitable than buying finished fuel products.

--Daniel Rodriguez, Daniel.rodriguez@opisnet.com

Copyright, Oil Price Information Service


Shell Begins Importing Fuel Into Central Mexico Using Trains

October 1, 2019

MEXICO CITY -- Shell unloaded its first unit train gasoline shipment into western Mexico on Tuesday at Grupo SIMSA's 695,000-bbl terminal at San Jose Iturbide in Guanajuato state.

As a result, Shell will be able to supply 25% of the fuel demand of its retail stations in the Bajio region. The company has 48 operating stations at Guanajuato, and it is in the process of opening 12 new stations at the moment.

With this milestone, the Anglo-Dutch company joins the club of private companies importing gasoline into Mexico, which includes BP, ExxonMobil, Glencore, Marathon Petroleum, Total, Valero and Windstar.

Private companies were behind 13% of Mexico's gasoline imports in July, according to data from the Mexican government, up from 3.5% a year ago. Companies have been able to gain market share by using unit train deliveries as new marine terminals are under construction.

The company has plans to do waterborne fuel imports into Mexico. However, it didn't say how in a statement released Tuesday.

Shell has at the moment nearly 200 stations across 12 states. It has the plan to create a retail network of over 1,200 stations in Mexico over the coming years underpinned by a $1 billion investment over the next decade for new infrastructure.

"Importing our fuel is a fundamental part of our value chain, and it represents an essential factor to support our growth plans in Mexico over the coming years," said Murray Fonseca, Shell Mexico's downstream director, in the statement.

The company will balance its imports with fuel purchases with domestic partners to ensure supply to its retail stations, Shell said. In the past, the company has said it has a supply contract in place with Mexico's state-owned crude oil company Pemex.

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service



Mexico's Pemex Expects to Start 2020 Producing 1.8 Million B/D of Crude Oil

September 24, 2019

MEXICO CITY -- Pemex expects to start 2020 with a production of 1.83 million b/d as it brings new wells online at several shallow water and onshore oil fields, the company's CEO said Tuesday.

"We stopped the production decline, we stabilized it, and we are starting to increase it," Octavio Romero Oropeza said during President Andrés Manuel López Obradordaily press conference.

Pemex so far this year has produced on average 1.69 million b/d of crude oil.

The company produced 1.62 million b/d in January, the lowest level in decades after it had to shut down production due to its inability to load product at ports amid bad weather.

The state oil company expects to bring 100,000 b/d of new production by December as it brings new wells at the Xikin, Xibic, Valeriana, Quesqui, Chejekbal, Manik, Ixachi, Mulach, Cheek, Pachil, Hok, Tlacame, Yaxche and Tetli fields.

On average, Pemex is expected to have a monthly average production of 1.778 million b/d in December, according to a presentation showed by Oropeza.

Pemex's production will decline in early October as it carries programmed maintenance work at its Yuum K'ak Naab floating production, storage and offloading (FPSO) unit at Campeche Bay as well its shallow water Cantarell complex.

As a result, the company will stop producing 1 million b/d of heavy crude oil for the first week of the month. This will be reflected as a monthly average decrease in the production of 33,000 b/d for October, he added.

Pemex expects to increase its hydrocarbon reserves in 2019, the first time it does in 15 years. It will end the year with 2 billion boe of new proven and possible (2P) reserves as well as 200 million boe of new proven (1P) reserves, he added.

The company expects to close 2019 with 7.2 billion boe of 1P reserves, and gradually increase this to 8.4 billion boe by the end of President Lopez Obrador administration in 2024, he added.

--Daniel Rodriguez, drodriguez@opisnet.com

Copyright, Oil Price Information Service