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Marathon ready to supply Mexico fuel market from both coasts

Bloomberg

New company to supply southern neighbor from both coasts. Across-the-border fuel shipments by rail also in the cards. -Marathon to become biggest U.S. refiner after buying Andeavor - Video

By Laura Blewitt

HOUSTON
Petroleumworld 05 01
2018

Now that Marathon Petroleum Corp. is combining with Andeavor, the largest U.S. refiner to be formed from the deal can dominate Mexico's freshly liberated gasoline and diesel markets from all sides.

“We had identified a part of Mexico, which was primarily to the northern part of Mexico, which we could go after now with the access from the Gulf Coast,” said Greg Goff, chairman of Andeavor during a conference call Monday.

Andeavor won the first-ever open season for fuel-storage assets owned by Petroleos Mexicanos in 2017, but didn't own refining capacity on the U.S. Gulf Coast to make the short tanker haul to major import ports like Pajaritos and Tuxpan on Mexico's East Coast. Gasoline and diesel could be shipped by seafaring tankers or delivered over the border in railcars from the Gulf Coast, Marathon said after the deal was announced.

The U.S. supplied 86 percent of the 864,000 barrels a day of fuels Mexico sources from abroad in March, according to vessel-tracking and shipping data collated by Bloomberg. After Marathon's $23.3 billion merger with Andeavor, it will become one of the biggest suppliers of fuel to Mexico, which struggles to produce a third of the fuels it could at nameplate capacity.

“We're one of the largest suppliers out of Galveston Bay, we take gasoline and diesel into the eastern side of Mexico,” Gary Heminger, Marathon's chief executive officer, said. “so together we provide a lot of supply into that market that would determine how we expand on that going forward.”

Gives access to cheap U.S. oil

Inside the largest refiner merger of all time is a hidden pipeline grab.

Andeavor purchased a 25 percent stake last week in Phillips 66 Partners LP's Gray Oak pipeline, which will haul Permian shale oil to the U.S. Gulf Coast starting in the end of next year. The integrated refining company also owns oil gathering assets in the world's most attractive shale basin. Now Andeavor has revealed where it will be shipping the crude: To Marathon's nearly 600,000 barrel-a-day operation in Galveston Bay, the nation's second-largest refining complex.

“They're long in gathering, and we're short in Galveston Bay,” said Gary Heminger, chairman of Marathon Petroleum Corp. on a conference call Monday. He said the refinery is currently purchasing 200,000 barrels a day of light oil. The combined company will procure about 1 billion barrels of crude a year.

The $23.3 billion merger adds another key crude source for Marathon's portfolio of midcontinent refineries. Andeavor's master limited partnership Andeavor Logistics gathers oil in the Bakken fields of North Dakota to flow through the Dakota Access Pipeline that started operations last summer. In February of last year, Marathon's MLP, MPLX LP, purchased a stake in the Bakken Pipeline system, which includes Dakota Access.

“It's definitely the combination of the two companies with a very strong logistics business,” Greg Goff, Andeavor's chairman, said Monday.

Petroleumworld.com

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Story by Laura Blewitt from Bloomberg.

bloomberg.com /
04 30 2018

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