The Only Constant Is Change


If there’s one thing you can say about Pemex, it’s this: they aren’t afraid to change things up. In this issue of Market Update, we’ll look at the oil company’s efforts to modernize and get to know the executives—and issues—that will shape the future of the Logisticas business unit. But it’s not all technology and turnover as refined fuel prices continue to climb in the face of tightening supply. Keep reading to get the full scoop.


As If Energy Reform Wasn’t Enough, Let’s Adopt Some New Technologies!

As Pemex seeks to improve its operational and financial performance, management is banking on technology to help drive results. The state oil giant recently entered into an agreement with Petroteq, a Toronto-based IT company that is currently working on a supply chain management platform based on advanced blockchain technology.

Considering that Pemex oversees a vast network of vertically-integrated entities, as well as a workforce of more than 100,000 employees and tens of thousands of vendors and buyers, a centralized management optimization tool sounds like a great plan. Of course, capturing business data is one thing; putting that data into action is quite another. With that said, kudos to Pemex for looking to get modern in the IT age. Only time will tell if they can take the next step and drive business performance after the tools are in place.

Blockchain isn’t Pemex’s only forward-looking play, however. As of the end of 2017, the national oil company has approved the use of Ethereum cryptocurrency as a form of payment at retail stations. Franchise owners will have the option to use Beluga Pay’s mobile point of sale platform, currently in beta. While limited to a handful of locations, the program will serve as a pilot to test and analyze data and customer feedback before Pemex makes a full-scale rollout decision.


Prices Up, IEPS Deductions Down, Volumes Impacted

Fuel prices along the USGC and Mexico continue to trend upward. Meanwhile, Mexico’s refineries are still operating at less than 50 percent utilization, with little sign of a correction in sight. Offline for months, the Pemex Madero refinery was slated for an early 2018 restart, but recent reports suggest that restart may be delayed until the end of March. At the same time, USGC refiners are entering what should be a sizable turnaround season, with tighter supply expected.

On the government side, the latest IEPS deduction contracted to the lowest levels since the middle of December 2017. The most recent announcement was the sixth consecutive decline in the rate for regular gasoline, and the fourth for premium and ULSD. Premium gasoline saw the most significant change, with a $0.06 cent per gallon reduction.

Citing the increased price to consumers, Onexpo, the large consortium of fuel retailers, expects that sales volumes may fall by as much as 15-20 percent. January is traditionally a lower demand period, but with fuel prices up 8 percent since December, consumers may shy away from spending on gasoline.


The Pemex Corporate Carousel

Pemex has revised its org chart once again, this time in Logisticas, where Armando Palacios will take the reins as CEO. Joining him will be David Ruelas, the unit’s new head of corporate finance. Señors Palacios and Ruelas inherit a full agenda at Logisticas, charged with overseeing the infrastructure open season as well as Pemex’s response to the issues of fuel theft that continue to pester the supply chain.

The re-launch of open season has seen the first of 11 asset packages open for bidding. With bids due this week, the results of the auction will follow later in March. The task of allocating assets in a size and function attractive to Pemex’s soon-to-be competitors has proved challenging for past leadership. It’s an unenviable task, to be sure.

Even more difficult to resolve will be the protection of Logistica’s assets. Last year, fuel taps led to losses totaled some $1.5 billion. Not to mention the cost of taking assets offline while repairs are made. If they hope to have a longer tenure than their predecessors, the new leadership will need to find real solutions to the problems that have so far eluded the unit.

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Chad Smith
Senior Vice President of Terminal Services