Every January, politicians and business leaders descend on Davos, Switzerland to discuss global economic policy at the World Economic Forum. This year, the crowd will include some familiar faces for those of us who have been keeping an eye on Mexico’s energy reforms. Get the full story in this issue of Market Update. Plus, catch up on Mexico’s latest open season auction.
The Davos Summit
With the World Economic Forum kicking off in Davos this week, the press is eagerly anticipating the arrival of President Trump and the US contingent. Given the President’s polarizing positions on trade, tax, and investments, there should be no shortage of headlines.
The official theme of this year’s summit is “Creating a Shared Future in a Fractured World.” Ties in well with the reshaping of Mexico’s energy industry, don’t you think? Pemex must too. Newly appointed CEO Carlos Trevino Medina will be on the ground at Davos to make the pitch in person. He is expected to host meetings with executives from Chevron, Lukoil, Shell, BP, Petronas, Ecopetrol, and Hunt Oil.
In addition to discussing the strategy and outlook for Pemex, as outlined in the recently published “Business Plan for Pemex,” Trevino Medina will address the challenges and opportunities presented by the reform, as well as the company’s ongoing efforts to position itself as environmentally responsible and sustainable.
Developing industry relationships with international players across their business segments should serve to restore Pemex’s global prominence.
Open Season Auction Details
Additional details have been released about the second open season auction on Pemex Logistica assets. Expected to kick off late next week, the second auction will offer 60,000 barrels of storage and 5,700 bpd pipeline access between Sabinas, Monclova, and Nuevo Laredo. The auction will conclude with the announcement of a winning bidder on March 14.
While on the surface interest levels are high and many parties will likely participate in the data room, we expect that the final result will prove disappointing for all parties. Why? First, the assets offered don’t comprise a logical base to import, store, transport, and market products. Second, Nuevo Laredo has a limited storage capacity (7,500 barrels), offers no diesel storage, and is not connected by pipeline. Add to that the fact that the Monclova and Sabinas facilities are pipeline-connected to Santa Catarina, and therefore necessitate the purchasing of product through Pemex. Real interest in the Mexican market still revolves around delivering product from the US to a local market at a logistics-adjusted price plus a margin versus the prevailing supply.
Circling back to our January 12 update, it appears that the return of open season auctions may prove to be a step sideways. While the auctions may not be as enticing as we had once hoped, they probably weren’t going to be the lynchpin on anyone’s expansion decisions anyway. For the present, it seems we’ll just have to watch, wait, and continue to build out that private infrastructure!
Interested in getting in on the ground floor of the Mexican fuels market? Click here to contact our international markets team.
Senior Vice President of Terminal Services