MEXICO CITY: Exxon Mobil Corp. is joining Chevron Corp. and other US refiners to supply the newly free Mexican fuel market.

Exxon sent two cargoes totalling 120,000 barrel of diesel and gasoline Wednesday from its refinery in Beaumont, Texas, to a private terminal in San Luis Potosi. The company is moving cargoes along Kansas City Southern Railway Co.’s network and plans to utilise the San Jose Iturbide terminal in Guanajuato state, which is being expanded, to bring in more supplies. Eventually, it aims to move product from all of its refineries along the Gulf Coast.

“Exxon Mobil is the first company to compete in the Mexican fuel market in an integrated form,” Carlos Rivas, general director of fuel for the company in Mexico, said Wednesday in a phone interview.

An increasing number of foreign firms plan to invest in ports terminals, fuel-storage facilities and other logistics infrastructure to compete with state-owned Petroleos Mexicanos, the country’s primary fuel vendor and distributor. After years of preparation, last week Mexico finished liberalising prices for gasoline and diesel across the nation.

Mexico is aiming to boost its fuel-inventory capacity to 30 days worth, in line with an international recommendation for 36, Energy Minister Pedro Joaquin Coldwell said Wednesday in Guanajuato, Mexico.

‘Abundant supply’

“US Gulf refineries have seen increasing utilisation rates, they are cheaper and more efficient than they were previously and they have abundant supply for the Mexican market,” said Alejandra Leon, Latin America upstream director at IHS in Mexico City. More private infrastructure projects would be ready in the next several years, making it easier for private companies to import fuel without going through Pemex, she added.

Exxon Mobil also indicated Wednesday that it will open 50 service stations by the end of first quarter and invest more than $300 million in Mexico’s energy sector. Rivas added that another cargo will arrive at San Luis Potosi with around 60,000 barrels of fuels.

Exxon could use Pemex pipelines or other facilities, and will also consider adding pipelines and more terminals than the two it has already announced, Rivas said.

Last week, Chevron said it will bring products from its California refining system to Mexico to supply its gas stations once the infrastructure becomes available. Koch Supply and Trading Mexico is shipping diesel by tanker from the US to the port of Veracruz on Mexico’s East coast.

Rail shipments

Kansas City Southern, which handled Exxon Mobil’s diesel and gasoline cargo, said in November that it was seeking an agreement Pemex’s trading arm PMI to import US fuels via rail into its San Luis Potosi terminal. Pemex would then transport fuels via pipeline to supply the Mexico City area.

Imports accounted for almost 74 per cent of Mexico’s gasoline and diesel sales in October as Pemex’s six refineries operated at their lowest volume in nearly 27 years because of unplanned stoppages, disruptions and maintenance. Delays in the restart of the Minatitlan and Madero refineries could also contribute to higher imports, said Ixchel Castro, senior analyst at energy consultant Wood Mackenzie in Mexico City.

The expansion of Mexico’s private fuel import market could result in the “crowding out” of domestic gasoline production, Carlos Serrano and Arnulfo Rodriguez, analysts at BBVA, wrote in a Dec. 1 research note.

“Looking ahead, we expect the oil trade deficit to continue widening, although at a slower pace, as higher local demand for oil-related consumption and intermediate goods will more likely be met by imports rather than local refineries’ output.”