Fresh Off The Boat


With oil prices holding more-or-less stable for the past six months, many in the industry have settled into new routines. For the time being it appears that energy markets have reached an equilibrium of sorts, one with relatively little risk and relatively little opportunity… with one exception. Mexico’s ongoing deregulation of its refined fuels market offers tremendous potential for American firms looking for attractive markets in today’s otherwise stagnant climate. In this issue of Market Update, we’ll cover the highlights from the last week in Mexico.


The starting gun

The biggest news of the past week was the delivery of the first non-PEMEX shipment of refined product into Mexico. The 40,000 barrel shipment was exported by Koch Supply and Trading out of the Flint Hills Corpus Christi refinery. The product was received at a terminal in Veracruz owned by Vopak, and is expected to be marketed directly to fuel retailers and industrial end users.

Independent fuel imports have been slow to mature due to the lack of infrastructure available at non-PEMEX controlled facilities. Volumes have been increasing over the past year but still represent a small portion of product entering the Mexican market. Our terminal in Brownsville is ideally suited for deliveries of refined product en route to Tamaulipas and Nuevo Leon via truck and rail.


Earthquakes, floods, and fires

The PEMEX-owned Salina Cruz refinery is back offline following the 8.2 magnitude earthquake that rocked Mexico last month. This is the second significant outage for the 330,000-bpd refinery this year, having also suffered a fire due to flooding during Tropical Storm Calvin. PEMEX has continued to meet market demand for product via waterborne cargos from the USGC, Europe and Asia. However, the devastation has resulted in decreased demand for refined products, as the impacted communities recover and look to repair infrastructure. It is expected that the refinery will resume production in the second half of October.


Uncertainty remains

Uncertainty persists as political rhetoric ramps up in advance of Mexico’s 2018 presidential election. The candidates, including current favorite Andres Manuel Lopez Obrador, continue to discuss topics including NAFTA renegotiation and repealing or modifying the Energy Reform acts passed under current President Enrique Pena Nieto. Energy-related strategic and financial sponsors remain cautious in deploying significant capital in Mexico, instead adopting a “wait and see” approach until the future comes into clearer focus.

Time will tell how these developments shape the future of the Mexican market. In the meantime, stay ahead of the curve with One Cypress Energy’s Market Update. Interested in moving into the Mexican fuels market? With established relationships on both sides of the border, our international fuels team can help you get in on the ground floor. Give us a call today.

Best, Chad Smith Senior Vice President of Terminal Operations