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Valero to reroute Mexico imports,
double capacity ofstorage network

Source: Valero

Valerio could shift from rail to ships as main import route

- Company to reach 6 million barrels of storage in 2022
Demand picking up slowly

By Sheky Espejo/Platts

Petroleumworld 03 08 2021

Valero is looking to reroute its fuel imports to Mexico, while more than doubling its storage capacity, as the company finalizes the construction of a network of terminals in the country by 2022, ahead of an expected recovery in demand, the company's Mexico head of operations said March 5.

Valero will be in a position to import all the fuel it distributes in Mexico through two Gulf of Mexico import terminals in the ports of Altamira and Veracruz for which the company has long-term contracts. The terminals will feed a network of smaller inland terminals by rail, Valero's Carlos Garcia told S&P Global Platts.

"Our goal is to supply the Mexican market with fuels that have been produced at our refineries through a network that we control, so that we can ensure the quality of the product and reliability of the supply," Garcia said.

Valero began its Mexican operations in 2018 with terminals in the states of Chihuahua and Nuevo Leon that were supplied by rail from its refinery in McKee, Texas, Garcia said. When Valero's network of terminals under development is completed, the company will have a total storage capacity of roughly 6 million barrels in key areas of the country, he said. This will allow Valero to stop bringing fuels to Mexico from Houston by rail.

"We will only use rail to move the product inland, which is safer than trucks," Garcia said.

Valero is the world's largest independent oil refiner, with an output of more than 3 million b/d of refined products from its refineries, mostly located in Texas.

According to data from Mexico's Energy Secretariat, private companies operating in the country imported 337,000 b/d of gasoline, diesel and jet fuel over 2020. Valero imported a little over 40,000 b/d into Mexico in 2020, Garcia said.

Planned expansion

The Veracruz terminal, the largest of the planned terminals in Mexico, with a total capacity of 2.1 million barrels, was recently completed by IEnova, the Mexico unit of California-based Sempra Energy. IEnova is also building two 640,000/b terminals in the Puebla and Mexico City region, also under long-term contracts with Valero. The three terminals will create a network that will allow Valero to better serve the center of the country, Garcia said.

The Puebla and Mexico City terminals will be ready to receive fuels from Veracruz by rail in the second quarter, although Valero is already servicing customers in Puebla with fuel from Veracruz through tanker trucks, he said.

Valero will also start supplying Guadalajara with fuel brought into Veracruz, Garcia said. The company now brings fuel into Guadalajara, Mexico's second-largest city, by rail from Houston, he said.

Construction is to begin in May at Valero's Altamira terminal, with a capacity of 1.1 million barrels, as permitting is completed, and it will be ready in 2022, Garcia said.

Altamira will supply a few smaller inland terminals, on which construction will also begin in the coming months and will be ready in 2022. A 425,000-barrel facility will be built in the industrial city of Monterrey and another in Guadalajara with a capacity of 505,000 barrels. Finally, to complete the network, Valero is planning a 140,000-barrel terminal in the central state of Aguascalientes.

"We will have our products in the high demand markets delivered in an efficient and secure way," Garcia said.

Expected demand

Demand for gasoline and diesel has slowly been picking up in Mexico, with diesel recovering more rapidly due to industrial activities, Garcia said. However, full recovery may not be achievable until people are able to go back to their normal lives, he said.

Valero supplies fuels for industrial clients and so-called "white flag" service stations in the country, apart from its own branded network of over 100 stations.

Mexico has been struggling with high levels of cases of coronavirus and limited medical infrastructure, which has led to a second wave of massive lockdowns in different areas of the country, including the capital city.

S&P Global Platts Analytics expects gasoline demand to average 755,000 b/d in 2021 and diesel demand to average 310,000 b/d, still slightly below 2019 levels. In the week ending Jan. 22, demand for gasoline in Mexico was 671,000 b/d, while diesel demand was 276,000 b/d, Energy Secretariat data shows.


By Sheky Espejo from S&P Global Platts
03 04 2021



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