Mexico fuel sector attracts international investors

By
Tuesday, October 31, 2017

The opening up of Mexico's fuel market as a result of the energy reform has ushered multiple international players into the sector.

First to arrive were several giant gasoline retailers, including BPChevronExxonMobilShell and Total.

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The market size that Mexico offers is very attractive since it is the world's six-largest gasoline consumer market, according to the US Energy Information Administration (EIA).

Fuel imports are increasing as the government issues more permits, which motorists hope will result in lower fuel prices. As part of a market liberalization process fuel prices rose sharply at the beginning of this year, sending inflation skyrocketing and sparking widespread protests.

Energy minister Pedro Joaquín Coldwell announced on October 26 that Mexico is expecting US$4bn in investment in the fuel storage and transportation sector over the next few years. This would be in addition to the expected US$12bn investment in the modernization and expansion of service stations.

As a result of the increase in suppliers, Mexico is expected to see an expansion of its fuel transportation and storage network.

Also read: New US refineries to boost gasoline exports to Mexico

EXPANSION PLANS

Anglo-Swiss resources conglomerate Glencore, which opened its first gas station in Mexico in August, plans to build two fuel storage terminals. They are slated to be opened next year in Dos Bocas in Tabasco state, and in Tuxpan in Veracruz state.

Alex Beard, the director of Glencore's oil division, was reported saying that the company plans to invest US$1bn in Mexico over the next five years. The investments would mostly be in fuel storage infrastructure with a large share going to the construction and launch of the two terminals.

IEnova, a subsidiary of US firm Valero Energy Corporationsigned a contract in August for the execution of the new Veracruz marine fuel terminal. The move came after IEnova won the bid in July for a 20-year concession to build and operate the US$155mn facility.

US railroad operator Kansas City Southern (KCS) is yet another foreign player betting on Mexico's fuel transportation market.

Earlier this month Mexican media reported CEO Patrick Ottensmeyer saying the company plans to open storage terminals in the north of the country. Subsidiary Kansas City Southern de México (KCSM) operates freight routes in northeastern and central Mexico, serving the Gulf coast ports of Tampico and Veracruz, and the Pacific port of Lázaro Cárdenas. 

KCSM and Watco Companies, a Kansas-based freight rail operator, embarked in January on a joint venture to expand exports of liquid fuels from the US to Mexico, including a liquid fuels terminal at the WTC industrial park in San Luis Potosí, which will be served by KCSM.

Then in February came the announcement that KCSM and local rail operators Ferromex and Ferrosur were set to invest a combined US$410mn to maintain and upgrade Mexican railway infrastructure. KCSM also said it would invest US$150mn to improve railway infrastructure and some of its existing locomotive fleet.

Also read: Mexico expects US$16bn in fuel sector investment