Opportunities, Uncertainty Dot Mexico's Changing Fuel Supply Landscape

 

The progress that Mexico’s ambitious energy reform program is making toward goals established in late 2013 is characterized as promising by downstream sector participants and observers, but it’s also been tortuous.

Fuel jobbers and business consultants there contacted by OPIS are excited at the prospect of marketers being able to source product from parties other than Pemex, perhaps group together regionally, take a greater hand in marketing and explore business opportunities elsewhere in the fuel supply chain.

“We will be responsible for our own market … and we have to fight for a share of the market in an ordered way,” said one jobber in Mexico who requested anonymity due to the uncertainty of reform specifics. “Sometimes I wake up and want to sell everything and other days I see people who want to do the right thing,” he added, calling reform a “very exciting process.”

Several international trading companies which have long supplied PMI, Pemex’s trading arm, are actively reaching out to marketers about future supply deals, the jobber said. Fuel supply infrastructure is also an area of high interest; for example, several private groups (some close to Mexico’s government) are said seeking alliances with interested parties who want to develop terminals.

However, downstream participants and observers also express frustration with the slow pace of the reform rollout. Marcial Diaz Ibarra, an energy expert with the Lexoil consultancy, points out that there are more unknowns than knowns when it comes to the criteria and rules for permits for imports, taxation, fuel storage, new stations and transportation.

The downstream-oriented Energy Regulatory Commission (CRE) is taking its time writing rules and regulations, and not sharing much information, players said. CRE isn’t taking appointments and responds to marketers’ questions only via snail mail, a “very slow process,” the jobber told OPIS.

Lexoil’s Diaz sees a number of questions that are so far unanswered by CRE, including: Are there grounds for rescission or cancellation of permits? What is the duration of permits? Will storage permission be conditional on having a fuel import permit or a purchase contract with Pemex? How will station inspections be made and who will carry them out? What monitoring mechanisms will CRE have?
According to another consultant in strategic business development in Mexico, CRE is expected by or during October 2015 to issue regulations on how to operate fuel stations that choose to carry branding other than Pemex. As of January 2016, stations can drop the Pemex name but Pemex is to continue supplying all stations with gasoline and diesel for at least one more year.

That prospect has jobbers now wondering whether dropping the Pemex brand from their stations could mean going dry at times, said the consultant, who spoke on condition of anonymity.

Speaking more to the opportunities of reform than to anxiety about it are perceptions about another upcoming date. May 2016 is when CRE is expected to issue criteria necessary for import licenses, the consultant said. “One day after those criteria come out there will be a huge line of people at CRE ready to apply for a license,” he forecast.

Observers of Mexico’s downstream market generally divide outside parties interested in the reforms into two groups. The smaller of the two consists of those companies setting up shop to the extent they can in order to develop business relationships, create trust, increase familiarity with their brand and hone their operations.

Calumet Specialty Products’ new operations in Mexico may be an example of that model. As the Indianapolis, Ind.-based company can’t sell gasoline and diesel in Mexico until 2017, their “initial product focus” on base oils, transformer oils, waxes, white mineral oils and other specialty hydrocarbon fluids could pave the way for future sales of transportation fuels. The company did not respond to OPIS’ queries about its Mexican operations, which were announced on June 9.

Calumet Specialty Oils de Mexico will be based out of Huixquilucan, Estado de Mexico, and provide global customers with access to bulk products through terminals in Jalisco, Nuevo Leon and Distrito Federal (Mexico City), and packaged products from a warehouse in Tlalnepantla (Mexico City).

The second group of parties outside of Mexico interested in reforms is the “wait and see” faction. Uncertainties loom large for those companies (some of them U.S. refiners which have long dealt with PMI) and they expect to benefit by learning from the mistakes of the first movers, one consultant told OPIS.

“We’ll figure it out,” said the jobber in a moment of optimism. “We have the volume and we’ll fight for our customers,” he added.