The content has been shared, if you want to share this content with other users click here.
With BP having opened its first gas station in Mexico this month, more competitors appear poised to enter the country's fuel market now that state oil firm Pemex's monopoly on imports and sales has come to an end after eight decades.
The overhaul of the sector is welcomed by motorists and the transport sector. There are expectations that having more players will lead to lower fuel prices, which suffered a sharp hike at the beginning of the year as the market is liberalized and subsidies are removed. The increase led to nationwide protests and blockades.
Beau Freyou, director of Houston-based brokerage IVG Energy, anticipates that competition will drive fuel prices down.
"The price of gasoline in Mexico is about to go down. Once all the players get in there and it becomes more efficient, gasoline will be the same price as in Texas within a year, at US$2 a gallon," he told BNamericas.
Local conglomerate Femsa launched Oxxo Gas last July, taking the name of the company's convenience stores located next to the stations it ran as franchises until Pemex began allowing franchisees to operate under their own brands.
BP revealed that it plans to open a further 200 stations this year and is targeting 1,500 over the next five years.
Swiss trader Glencore is entering Mexico's gas station market, according to a Bloomberg report. The company has a 15-year supply deal and will invest US$200mn with local owners, it said, citing people familiar with the matter.
Glencore, which reportedly will supply 180,000b/d of gasoline and diesel to 1,400 stations, declined to comment when contacted by BNamericas on Tuesday.
US firm Gulf Oil announced last March it would enter Mexico's fuels market, saying it planned to own and operate around 2,000 service stations within three years, but it put its plans on hold in December.
"The opportunities are huge in Mexico's gasoline and diesel market," Freyou said. They are likely to remain so as Mexico remains dependent on gasoline imports as its six refineries lack the capacity to meet domestic fuel demand. Imports have surpassed domestic production since 2014.
"Most of Mexico's oil production comes to Houston for refining, about 600,000b/d. Mexican oil is very heavy and the refineries in Houston can break it down. Mexico has the same low-sulfur standards as the US, 15 parts per million, but it is an expensive process to produce that, which requires a very good refinery, and Mexico doesn't have one," he added.
But more infrastructure is planned.
TransCanada, Sierra Oil & Gas and Grupo TMM announced plans last August to develop storage and transportation infrastructure to serve the growing demand for refined products such as gasoline, diesel and jet fuel in Mexico, describing the proposed US$800mn project as the largest single investment in refined products since the energy reform.
And last March, Monterra Energy said it would build a refined products pipeline in Mexico with a 165,000b/d capacity connecting the Gulf coast port of Tuxpan with Tula, where Pemex's Miguel Hidalgo refinery is located.