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Pemex: Tuesday's Earthquake Had No Major Impact on Gasoline Supply

September 20, 2017

Mexico's state-owned Pemex says that its assets related to the production, storage and distribution of gasoline were not significantly affected and are operating normally following the 7.1 magnitude earthquake that struck Mexico on Tuesday.

In light of this, Pemex issued a statement Tuesday exhorting the public not to make greater-than-normal gasoline purchases, adding that "gasoline supply is guaranteed."

"Pemex and its workers reaffirm their commitment to Mexico and stand in solidarity with the families that have been affected recently by various natural disasters in different parts of the country," Pemex said.

An earlier massive earthquake on Sept. 7 off the Pacific Coast of southern Mexico disrupted the operations of the 330,000-b/d Salina Cruz refinery in Oaxaca state.

Operations at the Salina Cruz refinery were briefly suspended after the 8.2 magnitude earthquake off the coast of Chiapas state, and then operations were halted again on Sept. 8 because of issues discovered later.

In a statement on Sept. 8, Pemex said it had so far not found evidence of structural damage at the major processing facilities of the Salina Cruz refinery. However, problems were discovered in the plant's electrical systems.

Sources also noted that three storage tanks were rendered unusable and that repairs were underway.

The Sept. 8 Pemex statement gave no guidance on how long resolution of the problems would take.

Mexico is a very big buyer of refined product imports, especially from Europe, because of the Salina Cruz outage as well as planned maintenance at the 190,000-b/d Madero refinery in Tamaulipas state.

Refined product exports to Mexico from the U.S. Gulf Coast have faltered, traders note, due to the significant amount of refining capacity disrupted by Hurricane Harvey as well as to strong demand from Florida, which experienced a consumption spike ahead of Hurricane Irma.


Chevron to Open 10 Retail Fuel Stations in Northwest Mexico by Year-End

September 11, 2017

Chevron will open 10 Chevron-branded retail fuel stations in Northwest Mexico before the end of this year, and up to 250 in the next three years in the states of Sonora, Sinaloa, Baja California and Baja California Sur, a company spokesman told OPIS.

On Aug. 27, Chevron opened its first gas retail station in Mexico at Hermosillo, Sonora.

The new retail fuel stations in Mexico will receive fuel supplies from Pemex during the first few months of store operations, he said.

"We're still working on building a supply chain to bring in fuel -- Pemex has the infrastructure now. But the fuel will have Techron (proprietary additive) added, so (it) will be Chevron gasoline," the spokesman said. Chevron owns three refineries in the U.S., Two of which are located in California -- El Segundo and Richmond. The third refinery is in Pascagoula, Miss.

Local media reports said that Chevron retail fuel prices were higher than Pemex stations in the same area, but the higher prices did not deter drivers from visiting the new Chevron station.

The Chevron spokesman said that Chevron does not set retail prices in Mexico, and local retail station operators set their own fuel prices.

Chevron's retail expansion is headed by its subsidiary, Chevron Combustibles de Mexico. Chevron plans to work with local partners to participate in the importation, distribution and commercialization of refined products in the country.

Chevron supplies fuel to 8,800 Chevron and Texaco stations in the Americas, and 5,000 Caltex outlets in Asia, Africa and the Middle East via Chevron and its affiliates, he said.

Besides Chevron, several large oil companies, including ExxonMobil, Shell, BP and Andeavor, have already opened or are opening retail fuel stations in Mexico.

OPIS notes that the growing presence of international oil companies in the Mexican midstream and downstream markets should give Pemex a run for its money. Prior to the market liberalization, Pemex, the state-owned oil company, had the monopoly of the Mexican market from upstream to downstream. As of today, Pemex still controls a majority of the retail and wholesale markets in Mexico, but this may change in the longer term.

In late 2015, Pemex opened a total of five Pemex-branded fuel stations in Houston and Pasadena.


Northeast Refiners, Oil Players Stepping Up to Supply Florida, Mexico

August 30, 2017

Northeast refiners and oil companies are now stepping up to supply the export destination markets in the U.S. Southeast, the Caribbean, Mexico and South America amid logistics and refinery shutdowns on the Gulf Coast.

These export destination markets are typically supplied by the Gulf Coast, and this rare export opportunity for New York Harbor, which is a net short gasoline market, is opened only because of the Gulf Coast refinery and logistics issues.

The Southeast and Midcontinent regions are facing a lack of products flows from the Gulf Coast due to reduced rates at Colonial Pipeline and a shutdown of Explorer Pipeline. New York Harbor sees a consistent gasoline import flow from Europe, but New York Harbor could offer the quickest resupply to Florida if prompt supply and barges are available.

In the past few days, the Northeast market saw a flurry of gasoline cargo sales, and vessel chartering for Jones Act barges and foreign-flagged tankers for delivery to the south, traders and shipping sources told OPIS on Wednesday. They said that ExxonMobil, BP, Vitol, Marathon and possibly Trafigura had booked barges or ships for delivery down south.

As many as eight ships and barges were booked for loading gasoline for delivery to multiple destinations down south, they said. At least four Jones Act barges are expected to load gasoline in the New York Harbor for delivery to Florida, and as many as three or four foreign-flagged ships have been booked for delivery to the Caribbean, Mexico and South America.

The Northeast and Mid-Atlantic refiners are expected to capitalize on this rare arbitrage opportunity. Philadelphia Energy Solutions has sold out its prompt gasoline supplies due to the sale of several cargoes for delivery to Florida, and possibly other destinations, sources said. It is noted that PES is still supplying the local markets in the Mid-Atlantic, maintaining competitive rack prices.

OPIS reported earlier this week that the New York Harbor market is planning to ship gasoline down to Florida.

Meanwhile, this arbitrage opportunity for Northeast exports may stay open as long as the Gulf Coast refinery capacity remains curtailed by the storm impact.

Some Corpus Christi refineries are in a restart mode, while some in Texas are still assessing their operations after the storm

Andeavor Expects Its Mexican, U.S. Fuel Profit Margins to Be on Par

August 9, 2017

Andeavor's CEO Greg Goff said on Wednesday that the company has limited capital tied up with its fuel supply expansion into Mexico and that its profit margin in Mexico is expected to be about on par with its margin in the U.S.

Goff was responding to a question from an analyst during the company's second- quarter earnings call about risk premiums tied to the company's operations in new markets south of the border.

"We are going to take a portfolio approach and initially our business would be a brand, ARCO branded wholesale business. So from that standpoint, we don't have a lot of capital tied up into the business and we think the margin environment will be somewhat comparable to what we had experienced in the United States," Goff said.

He said that Andeavor will evaluate economic viability of investing in company- operated retail stations in Mexico.

"From a marketing standpoint, we don't see that type of risk that would justify any type of risk profile, it would be different if you are in the refining business, but we see it just comparable to the rest of our marketing business," Goff said.

Goff said that the recent company's announcements on Mexican expansions are focused on the northwest Mexico fuel markets, with an eye for natural synergy with Andeavor's Los Angeles refineries. However, it will also look at supplying fuel in Mexico from El Paso, Texas.

He said that Mexico is a natural extension of Andeavor's value chain. "We believe that as we looked at the market area and at this stage we focus much more on northwest Mexico then we have coming out of [the] El Paso Refinery just because of the time we have had since we closed the acquisition" of Western Refining, he said.

Andeavor had previously said that the targeted part of northwest Mexico has a demand of about 160,000 b/d, of which two-thirds of that volume is gasoline and one-third diesel. That regional demand is seen growing, Goff said.

Andeavor has the potential to grow this new fuel market presence in Mexico significantly over the next five years, Goff said. This would include retail stations, a wholesale business and a commercial business, he added. The product slate will also expand beyond gasoline and diesel, Goff said.

"As we get more into it, we have created an organization that will be partially based in Mexico and in the U.S. and be able to develop that and be able to talk very shortly about what we see the potential to be from an overall profitability standpoint, but it's going to take us three to five years to get to the point we want to get to," he said.

Goff also stressed the importance of working together with Pemex to supply fuel to northern Mexico efficiently.

He said Mexican fuel buyers are experiencing a tremendous change as buyers are now engaged in a very competitive marketplace.

"One of the challenges has been to work kind of effectively with the people in Pemex to be able to think through how you approach the opening and how you structure agreements that work for everyone involved and address all of the different issues that you have in any business like that," he said.

Andeavor is focusing on the details of the entire supply chain, aiming to bring cost-effective supplies to the people of Mexico, he said.

In July, OPIS reported that Andeavor had signed a definitive agreement that will enable the company to supply transportation fuels and launch the ARCO brand in the states of Sonora and Baja California, Mexico. Tesoro plans to integrate supply to Mexico with its West Coast refining, marketing and logistics system and expects to expand the brand throughout Baja California and Sonora to achieve a leading market position in both states.

Andeavor also reached a definitive agreement with Pemex for terminaling and transportation services in Mexico. The agreement will enable Tesoro to supply 30,000-40,000 b/d of transportation fuels in the Mexican states of Sonora and Baja California.



Pemex Still Working on Fuel Production at Salina Cruz Ref.; No Market Impact

August 8, 2017

Mexico's Pemex is still working on producing fuel at its 330,000-b/d Salina Cruz refinery, located on the southwestern seaboard of the country despite restarting the plant at the end of July, some traders told OPIS on Tuesday.

The slow restoration of normal operation and actual fuel production at Salina Cruz refinery has little impact on the U.S. and European gasoline and distillates markets because the slow restart process was "not unexpected," they said. The Salina Cruz refinery was shut in mid-June due to flooding issues after a storm.

OPIS notes that a refinery could be restarted, but it may not be actually producing fuel after a restart. A restart process at a refinery, from the day the units are restarted to actual production of on-spec fuel, could take a few days or weeks, depending on the nature of the refinery issues. Sometimes, a refinery could slowly ramp up the production, which could take a few days or weeks, as a precaution.

Some industry sources in Mexico told OPIS in July that the Salina Cruz refinery could be restarted in two phases.

As previously reported by OPIS in July, some industry sources who do businesses with PMI did not expect the Salina Cruz refinery to restart as planned on July 30, based on the higher-than-normal volumes of gasoline and diesel bought by PMI for June-August deliveries.

"There is nothing fresh from the Pemex refinery situation to impact the oil markets," a trader said.

Sources had said that PMI had been buying gasoline supplies out of Europe, and distillates and gasoline out of the U.S. Gulf Coast. However, purchases from the West Coast market had gone quiet after the prompt requirements were met in late June through early July. This is in line with OPIS reports in June-July on PMI's requirements to resupply amid production losses at Salina Cruz. PMI was expected to buy prompt cargoes from the West Coast refiners at a premium price compared with Gulf Coast and Europe, and PMI was to backfill forward deliveries with comparatively cheaper cargoes from Europe and the Gulf Coast.

PMI is said to have covered its products requirements from now to at least the first half of August. However, based on the slow refinery restart, the European and Gulf Coast products markets may see PMI continuing to cover higher-than- normal supply requirements well into September.

The estimated gasoline supply shortfall from the Salina Cruz refinery shutdown was 65,000-70,000 b/d, traders told OPIS in June. The refinery could have been operating at an average of 76% before it shut down, based on information earlier this year from the Secretaria de Energia in Mexico. None of the six Mexican refineries operate anywhere near 100% capacity; the highest has been Salamanca at 78%, and Madero the lowest at 38%.

A trader said that Mexico's demand for gasoline and components imports could rise to 550,000 b/d from the normal range of 450,000-500,000 b/d, but he noted that the estimated jump could be on the high side.


Analyst: Valero Deal in Mexico an Attractive Platform for Future Growth

August 4, 2017

Valero Energy's new deal with IEnova in Mexico is a positive strategic development for the independent U.S. refiner, researchers at Tudor, Pickering, Holt & Co. (TPH) said in a note to clients Friday.

The arrangement with company subsidiary Valero Marketing and Supply de Mexico widens Valero's current fuel export channel to Mexico through state oil company Pemex by ensuring ratable direct export delivery of gasoline, diesel and jet fuel into Mexico, TPH noted.

Commenting on the deal Thursday, Valero Chairman, President and CEO Joe Gorder said the company was looking ahead to "discussing opportunities with Pemex that advance our respective strategic objectives, as well as discussing supply arrangements with independent retail operators." Distribution possibilities include branded sales, he added.

Secondly, Valero's control of the storage capacity at the three terminals to be built by IEnova (at the Port of Veracruz and near Puebla and Mexico City) "represents an attractive platform for future growth by developing direct marketing channels," TPH said.

That platform presents the opportunity to develop sales into the wholesale market across the rack to independent retailers and distribution into a potential Valero-branded network, TPH said.

In Valero's existing Latin America-focused export strategy, its total product exports have averaged some 385,000 b/d since 2016, or about 15% of the company's total light product output over that time period, the bank said.
Valero has outlined plans to expand total export capacity across its system to 865,000 b/d from 695,000 b/d, according to TPH.

TPH acknowledged that "doing business in Mexico carries meaningful challenges," for Valero and Andeavor (in northwest Mexico) "but these moves represent natural extensions of US refiners' marketing channels."

As reported Thursday, Valero will send refined products to a 1.4 million-bbl import terminal IEnova is building at the Port of Veracruz. Capacity at the planned storage terminals near Puebla and Mexico City is to total 500,000 bbl and 800,000 bbl, respectively.

Valero will have the option to acquire a 50% interest in all of the terminals.

To move product from Veracruz to the inland terminals, Valero executed a separate agreement with rail company Ferromex.

The marine terminal at Veracruz is expected to begin operations as early as the end of 2018, and the two inland terminals are expected to start operations in early 2019.


Andeavor Expects Its Mexican, U.S. Fuel Profit Margins to Be on Par

August 9, 2017

Andeavor's CEO Greg Goff said on Wednesday that the company has limited capital tied up with its fuel supply expansion into Mexico and that its profit margin in Mexico is expected to be about on par with its margin in the U.S.

Goff was responding to a question from an analyst during the company's second- quarter earnings call about risk premiums tied to the company's operations in new markets south of the border.

"We are going to take a portfolio approach and initially our business would be a brand, ARCO branded wholesale business. So from that standpoint, we don't have a lot of capital tied up into the business and we think the margin environment will be somewhat comparable to what we had experienced in the United States," Goff said.

He said that Andeavor will evaluate economic viability of investing in company- operated retail stations in Mexico.

"From a marketing standpoint, we don't see that type of risk that would justify any type of risk profile, it would be different if you are in the refining business, but we see it just comparable to the rest of our marketing business,"
Goff said.

Goff said that the recent company's announcements on Mexican expansions are focused on the northwest Mexico fuel markets, with an eye for natural synergy with Andeavor's Los Angeles refineries. However, it will also look at supplying fuel in Mexico from El Paso, Texas.

He said that Mexico is a natural extension of Andeavor's value chain. "We believe that as we looked at the market area and at this stage we focus much more on northwest Mexico then we have coming out of [the] El Paso Refinery just because of the time we have had since we closed the acquisition" of Western Refining, he said.

Andeavor had previously said that the targeted part of northwest Mexico has a demand of about 160,000 b/d, of which two-thirds of that volume is gasoline and one-third diesel. That regional demand is seen growing, Goff said.

Andeavor has the potential to grow this new fuel market presence in Mexico significantly over the next five years, Goff said. This would include retail stations, a wholesale business and a commercial business, he added. The product slate will also expand beyond gasoline and diesel, Goff said.

"As we get more into it, we have created an organization that will be partially based in Mexico and in the U.S. and be able to develop that and be able to talk very shortly about what we see the potential to be from an overall profitability standpoint, but it's going to take us three to five years to get to the point we want to get to," he said.

Goff also stressed the importance of working together with Pemex to supply fuel to northern Mexico efficiently.

He said Mexican fuel buyers are experiencing a tremendous change as buyers are now engaged in a very competitive marketplace.

"One of the challenges has been to work kind of effectively with the people in Pemex to be able to think through how you approach the opening and how you structure agreements that work for everyone involved and address all of the different issues that you have in any business like that," he said.

Andeavor is focusing on the details of the entire supply chain, aiming to bring cost-effective supplies to the people of Mexico, he said.

In July, OPIS reported that Andeavor had signed a definitive agreement that will enable the company to supply transportation fuels and launch the ARCO brand in the states of Sonora and Baja California, Mexico. Tesoro plans to integrate supply to Mexico with its West Coast refining, marketing and logistics system and expects to expand the brand throughout Baja California and Sonora to achieve a leading market position in both states.

Andeavor also reached a definitive agreement with Pemex for terminaling and transportation services in Mexico. The agreement will enable Tesoro to supply 30,000-40,000 b/d of transportation fuels in the Mexican states of Sonora and Baja California.


Petredec Orders Up To Four VLGCs

Global LPG trading company Petredec has ordered two 84,000-cbm Very Large Gas Carriers (VLGC) with options to build a further two units with Chinese shipyard Jiangnan, the Singapore arm of the group announced Monday. The first two vessels are expected to be delivered during Q2 and Q3 2019 and the optional vessels, if taken, would deliver later the same year, Petredec stated.

The additions would bring Petredec's VLGC fleet to 21.

Petredec said that the vessels will comply with all the latest environmental legislation, including NOx Tier III, the new IGC code and with the USCG-approved Ballast Water Treatment System, to make them some of the most economical VLGCs in the global fleet.

Petredec Chief Executive Giles Fearn stated that the market expects to see accelerated scrapping of older vessels, which are less efficient and don't comply with the latest environmental regulations and face expensive dry docks.

"Petredec must continue to provide the best service to our customers and therefore cannot be too dependent on third party tonnage providers," Fearn commented.

The group delivers over 12 million tons of LPG annually with a controlled fleet of over 70 gas carriers.

 

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