Copyright of the Daily Oil Bulletin 2017
New Competitors In Gasoline And Fuel Import Areas For Pemex
The end of the monopoly over all facets of Mexico’s oil and gas sector has led to a torrent of new competitors for Petroleos Mexicanos (Pemex) in the gasoline station and fuel import areas, according to new statistics from the country’s Energy Secretariat (Sener).
Energy Secretary Pedro Joaquin Coldwell reported Tuesday that 196 companies have applied to the government for petroleum import licenses.
Coldwell said companies that range from mining firms, planning to use imported fuel for their own operations, to national and international firms entering Mexico’s fuel sales market, have applied for permits.
Meanwhile, Coldwell said there are now 2,578 service stations in the country, out of a total of 11,700, that are owned by non-Pemex affiliated firms.
These range from BP plc, which has opened a handful of stations and has said it plans to open 1,500 over the next five years, to mining conglomerate Glencore, which has announced its partnership with a Mexican company and their plans to open 1,400 stations in the country.
Other entrants include giant retailer Costco, Chevron Corporation and Exxon Mobil Corporation.
The country’s Energy Regulatory Commission (CRE) says there are now 26 brands, including Pemex, competing in the market.
All of the Pemex stations are operated by franchisees and until this past year it was the only company allowed to distribute and market refined products in Mexico, but that monopoly has ended.
“The consumer is starting to have the power to choose because everyday new service stations are opening,” said Coldwell. “There are 30 new brands and 1,700 [new] gas stations.”
Pemex, saddled with a debt of about $100 billion and with the ownership of six refineries that need major upgrades, has become a vulnerable giant, as better financed competitors enter the market.
Carla Bass, editor of the Argus Media Mexico Fuel Markets Report, recently estimated that the fuel transportation, storage and refined fuel and sales market in Mexico will represent a US$15-billion market over the next eight years.
“Mexico is going through a massive energy industry reform,” she said. “We’ve been focusing on the retail portion of the reform because we knew it would be a dynamic sector.”
The country started about four years ago ending the monopoly of state-owned Pemex over the upstream, midstream and downstream sectors of the energy industry.
However, left wing firebrand Andres Manuel Lopez Obrador, a former mayor of Mexico City, who is leading in polling in an upcoming election of president to be held next July has threatened to dial back some of the reforms or stall aspects of it.
Bass mentioned that threat specifically during a recent webinar, but she said she believes the fuel transport, refining, storage and sales sectors will still be open for a large amount of competition.
At this point competitors need to buy their gasoline, diesel and other refined products from Pemex, but liberation of the market is spreading gradually state-by-state and operators will be able to import products directly from the U.S. and elsewhere.
That has led to announcements by a number of companies which are planning to build refined product pipelines from the U.S. to Mexico.
For instance, San Antonio, Tex.-based Howard Midstream Energy Partners plans to construct and operate a system of petroleum products terminals and pipelines from Corpus Christi, Tex., to northern Mexico. It would operate a 275 kilometre system of pipelines and develop terminals with the capacity to store 1.2 million bbls/d of petroleum products and terminals.
Bass said Mexico represents a potentially large market for private sector entrants.
She said the country is vastly underserved in the area of fuel product distribution and sales, with per capita fuel service options being four times less than the U.S., if it had the same population (the U.S. population is about triple that of Mexico).
As demand ramps up, the country is importing growing volumes of refined products, said Bass.
For instance, this past summer imports from the U.S. reached about the equivalent of 500,000 bbls/d.
Pemex is investing in refinery upgrades, including planned new upgraders to process the country’s Mayan heavy crude. It plans to spend more than $4 billion at its Tula refining complex, near Veracruz, but hopes to attract a partner.
She said Pemex and private sector fuel distributors are coming up with many security options to lower the theft of fuel in the country by drug gangs and others.
Illegal taps are so pervasive, fuel thieves have a nickname, being called huachicoleros.
Those taps resulted in losses of 2.2 billion litres of fuel in 2016, a 24 per cent increase from 2015. There were 7,642 illegal pipeline taps during the first nine months of this year, which exceeds the entire total for last year.
There are 17,000 kilometres of fuel pipelines across the country and illegal taps amount to about 28 per day.
Mexico’s transportation fuel market is worth an estimated 700 billion pesos a year (about US$37.45 billion), with the fuel thieves having stolen fuel worth an estimated US$1 billion last year.
Recently, Daily Oil Bulletinreported that Atlanta-based National Standard, which is involved in infrastructure investments year-round, announced it is working with a Saudi Arabian-based investment fund to invest in the midstream sector in Mexico.